Front Page Titles (by Subject) A REVIEW OF THE PRINCIPLES AND ARGUMENTS Of the two foregoing Essays, viz. The Seventh Essay on Finance, and The Plea for the Poor Soldiers; WITH SOME OBSERVATIONS ON THE FINANCES of the UNION. - Political Essays on the Nature and Operation of Money, Public Finances and Other Subjects
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A REVIEW OF THE PRINCIPLES AND ARGUMENTS Of the two foregoing Essays, viz. The Seventh Essay on Finance, and The Plea for the Poor Soldiers; WITH SOME OBSERVATIONS ON THE FINANCES of the UNION. - Pelatiah Webster, Political Essays on the Nature and Operation of Money, Public Finances and Other Subjects 
Political Essays on the Nature and Operation of Money, Public Finances and Other Subjects, published during the American War, and continued up to the present Year, 1791 (Philadelphia: Joseph Crukshank, 1791).
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A REVIEW OF THE PRINCIPLES AND ARGUMENTS Of the two foregoing Essays, viz.
I. THE finances or management of the stock or revenue of every State or individual, from the greatest Empire down to the least Republic, from the highest company to the lowest partnership, from the richest landholder or merchant to the poorest peasant or pedlar, determines their fortune or fate, is the great principle out of which their peace and plenty, or their embarrassment and straits, must grow, and from which must proceed their final honors and success, or their disgrace and ruin.
This subject, of course, becomes an object of most capital concern, and ought to be an object of first consideration, both of every community and also of every individual.
Therefore, when any plan, either of political manœuvre in a nation, or business in lesser communities or individuals, is in contemplation, to count the cost becomes an indispensable part of the deliberations.
And when the cost is properly computed or counted, the next thing is, to look out for and find revenues or incomes sufficient to pay it.
An error in either of these, i. e. a wild calculation of the expense of any proposed plan, or a wild and deficient estimate of the income or revenue sufficient to pay it, is the common and usual cause of bankruptcy, breach of faith, and loss of credit, in both the one and the other, and of all the disgraces, embarrassments, and other ruinous consequences which must flow therefrom.
II. The capital stock of a nation or individual is the wealth each possesses, and the resources which are with certainty within their power; but the more proper and safe way of computing the stock is rather by the yearly income or revenue, than by the capital; because if the annual expenditures exceed the annual incomes, the capital stock must be left in debt at the end of the year, which, if continued, must soon produce embarrassments and straits, and even bankruptcy in the end.
It often happens that much valuable property is so conditioned, that it will not produce any yearly income, or, at most, not any that is adequate to the interest of its value; therefore, it would be very imprudent for a nation or individual to make calculations of yearly expenditures, grounded on such estates, for they will fail of supply otherwise than by way of mortgage, which ought to be avoided as a last, because it is a fatal, resort.
III. But let the stock or finance of a nation or individual be ever so good and affluent, yet every advantage of it must and ever will arise from, and be limited by, the justice, honesty, and truth, with which it is negotiated or administered. Honest payment of just debts, and fulfilment of contracts, are most essentially necessary to give either a nation or individual the command and control of all the supplies andservices, which can be furnished within the circle of their influence.
For all persons will hasten with eagerness to render all supplies and services in their power to an honest, grateful paymaster, and will avoid, with a proportionate reluctance, furnishing either the one or the other to a dishonest, dilatory, or trickish paymaster.
And, of course, all supplies and services, in the one case, will be obtained in the easiest, quickest manner, and will be executed and rendered in the highest perfection (as there will be choice of materials, stores, and workmen) and in the cheapest way, and at the lowest rates.
But, in the other case, both the supplies and services will be embarrassed in their acquirement, will be executed and rendered in deficient manner, and at very high prices; for every one is loth to deal with a bad paymaster, nor will suffer himself to be engaged or employed by him, unless he is impelled by some urgent necessity, or induced by the offer of very high price, or great emoluments.
IV. Economy and prudence in expenditures is absolutely necessary to the obtainment of the great advantages and benefits of the revenue or national stock; without this, that justice and honesty in the management of the revenue can never be practised, which is essentially necessary to its ends and uses: for if the revenue or stock is wasted by needless expenses, those which are necessary must be unprovided for; if large, fictitious, and groundless demands are accepted and paid, debts which are by honor, contract, and real merits, justly due, must lie unpaid.
This operates not only to the great injury of the real creditors, but also to the embarrassment of the whole community; for every branch of business in the nation stands connected with the public finance, as the public debts are great and extensive objects of dependence and exchange, and, of course, any disappointment in these will generate innumerable disappointments in the course of currency thro’ which they ought to pass, and, of course, will either directly or remotely affect every branch of business.
We have had late and large proof of this kind of vexation, in the numberless instances of persons who could not carry on their business, or pay their debts, because they were disappointed of receiving monies due to them by the public: such a mode of financiering as this will ruin any nation in the world.
The foregoing propositions and remarks I consider as maxims or first principles, which force the assent of the mind at first sight, by a kind of intuitive proof or instant perception, and which nobody will ever think of disputing, much less of denying; I therefore premise them like axioms, on which I may safely proceed to build any doctrines or plans which really rest on these foundations, or come within their essential principles and reasons.—I go on now with my Review of the Principles and Arguments of the two foregoing Essays.
The great principles of the two foregoing Essays are comprised in the following propositions:
I. That all certificates delivered to the public creditors, ought to be placed to the debit of their account, at the value or exchange of them at the time they received them, and the remainder or residue of the debt due to them, ought to be paid to them with interest; and that all certificates, when brought into the treasury, ought to be paid to the bearer, whether an original holder or alienee, at the value or exchange, which each of them bore at the time of its date, or at the current exchange at the time of redemption, as the case may require. If this cannot be admitted, my second proposition is,
II. To pay all certificates brought in by the original holders, at full nominal value, with interest; and to pay all the alienated certificates at the value or exchange they bore at their dates, or at the time of redemption, as the case may require. If this cannot be admitted, I propose,
III. That the original holders be first paid, and the speculators, last of all, if they must be paid at all.
The great principle or substance of my argument is, that the public money ought to be paid to the real, original creditors, who, by rendering supplies and services to the country, have really, meritoriously, and painfully earned it: for,
1. Their demand is founded on the most solemn contract of Congress, who had good right to make such contract, which binds the honor, the morality, and justice of the country, and nothing but payment can discharge the country from the guilt of injustice, and violation of faith and truth most solemnly plighted to them.
2. They fulfilled the whole of said solemn contract virtuously, honestly, and very painfully on their parts, and therefore, on every principle of merit and earning, are entitled to their pay.
3. The infinite benefits we derive from that contract and their faithful fulfilment of it, afford another argument why we should pay them: we cannot honestly enjoy the benefit of any man’s labor, without paying him his hire; it is to the supplies and services of these men, that we are indebted for our country, our lives, our estates, our liberty, and our independence, and all the blessings of a free government, uncontrolled and unbiassed by any foreign power or influence; and it ought not to be thought possible, that such an American government, which derives its existence from the exertions, the travails, and persevering virtue of these patriots, should, by a public act, deny them their pay, their hire, their reward, for merits which have been so beneficial to us, and painful to them; or should suffer any how the public money, carved out of the wealth and earnings of our citizens for the very purpose of paying these worthy patriots, to be diverted from this desirable object, or to be applied to any other purpose whatever.
4. The heart-moving and unparallelled distresses of very many thousands of these worthy patriots for want of their pay, is another cogent reason why they should be paid: I do not say, that the benefits we receive from their merits, or the distresses they suffer from our breach of faith and promise in denying them their pay, increase or alter the stipulations of their contract; but both have a strong effect on the gratitude, the benevolence, and compassion of the human mind, which are virtues of such precious and primary consideration in society, that, I think, no government ought to be callous to their influence, or hardened into an insensibilityof their force. We all think it worse to refuse a laborer his hire, when he and his family must starve and perish for want of it, than to deny payment of an equal sum to a rich man, who had an equally just demand, but whose fortune would enable him to bear the loss without pain.
5. These original creditors have not yet been paid, but in small part, and therefore the remaining balance is still due to them, and ought to be paid. Nobody pretends they have ever received any payment but negotiable certificates made payable to the bearer, and worth on average, when they received them, about 2s. 6d. in the pound; these certificates, I say, ought to be debited to them at their value or current exchange when they received them; so much they have received, and no more; and the residue of balance due to them ought to be paid to them.
I have attended to all the debates on this great subject, both public and private, which have fell in my way, but I do not recollect one person who ever seriously insisted, that the certificates delivered to the public creditors were full payment of the debt due to them; but this notwithstanding, I have heard many objections, filly and nugatory enough, strongly urged against making any further payment to those who had sold their certificates.
1. One was, that if they had not fold their debt, they had sold the evidence of it, and so could have no further demand: this is not true; the evidence of the debt is the public books, where their accounts are adjusted, and the balance due to them is entered; and nothing can justly be objected to this but some evidence that the debt has been paid; which evidence, the certificate, if produced, could not supply. Further, the certificate, if produced, could not be so good evidence as the public books; for the one might be counterfeit, the other could not be: suppose a man brings suit on a record, of which he has some time or other taken a copy, and produces the record in court; can it be objected to his recovery, that he has not produced the copy? Or, if a man brings suit on a contract, and has three witnesses to it, two of which he produces, who fully verify the fact; shall he lose his cause, because he did not call in the third witness?
The public creditor who demands his pay, must doubtless bring evidence sufficient to support his suit, i. e. the proof will lie upon him, and if he can, in any way, verify the facts, and support his right, he doubtless ought to be paid.
2. Another objection has been made, viz. that all the original creditors who sold their certificates, were not driven by necessity to do this; and what if they were not? can there be any crime or disqualification in selling a negotiable certificate, made payable to the bearer, and purposely calculated, like bills of money, for negotiation and currency thro’ any and every hand?
3. It has been objected, that some original creditors sold their certificates thro’ diffidence of the public faith. And what if they did? Do you think they were singular in their diffidence? Suppose any man wants confidence in his debtor, and fears or doubts that he shall lose his debt; Can that affect the justice of his demand, or his right to payment?
4. Another objects to any further payment, because some of the creditors who sold their certificates for 2s. 6d. in the pound, had managed their 2s. 6d. so well by a seven years’ negotiation, as to make 20s. out of it.
5. Another objects, that many of the public creditors were of such a dissipating turn, that if they were paid the whole 20s. due to them, they would soon spend it, and, of course, would be no better but rather worse off, than if they had never been paid.
Now, gentlemen-readers, suppose any private debtor should be summoned into court, at the suit of his creditor, for a debt of 20s. and he should show that he had, seven years ago, paid his creditor 2s. 6d. of the debt of 20s. and plead any or all the foregoing objections against any further payment of the 17s. 6d. which remained due; can you imagine that the court would allow such plea to be good in law or equity, and sufficient to discharge the debtor from any further payment? And if these pleas and objections should appear trifling and ridiculous in a private concern, can you bring yourselves to believe they would receive any additional weight or dignity from being introduced by any most dignified personage, and urged in the most august assembly on earth, against paying public creditors circumstanced in the same manner.
But the great objection still remains, the clincher that is to support the whole plan, and so connect the parts together, as to make the whole consistent with law, reason, right, and justice; for certainly no plan can be justified, which has not all these qualities. This capital objection to paying the original creditors, who have sold their certificates, the balance of the debt, which has never been paid to them, is this, viz.
They have sold their certificates, and thereby conveyed to the purchaser all their right to their demand or debt due to them. As much stress is laid on this objection, it requires a particular consideration.
1. If the public promise or faith is supposed to be given in the certificate, it was broken the instant it was made; it was violated in the very birth of it; it was verbal only, not real; the words expressed the nominal value, but the reality or meaning sunk down instantly to the current value, by the very construction which Congress itself fixed, by their scale, on like words in the loan-office certificates, and under this construction they passed, by universal consent of buyer and seller, from hand to hand.
The wrong was instantly done to the original creditor, and he instantly sustained the injury and damage, and, consequently, if any thing is to be done in future time to compensate or repair that damage, it ought so to be done, that he who suffered the injury and damage, may receive the benefit of it; making this compensation to a stranger, who suffered nothing, is no repair of the wrong done, is no sort of restoration of injured right, and is, of course, nugatory and ridiculous.
2. But, in real truth, if the public saith was designed to be really plighted at all, it was annexed to the debt, not to the certificate; the debt was founded on the merits orvaluable considerations out of which it grew, and to these it adheres, and carries with it the promise or public faith which is annexed to it.
The certificates and these merits are very widely different things; the one depreciated to 2s. 6d. in the pound; the other kept their value without the least diminution; the one was transferred; the other was not. The speculators can produce the certificates, but they cannot produce the merits, of the original creditors: these they never bought or paid for, and, therefore, can have no right or claim to them, or the rewards of them, i. e. to the debt annexed to them; for it is impossible that one man should have a right to the labor or hire of another, without paying a valuable consideration for it; if it was even agreed to be transferred without this, the transfer would be void as a nudum pactum, not only by the laws of the land, but by the immutable laws of commutative justice.
3. The certificate was never either delivered to, or received by, the original creditor, as full payment of the debt due to him, and therefore never comprised or carried in it that debt; nor is it pretended or pleaded by any body as any thing more than the evidence of that debt; and, of course, if the debt can be sufficiently proved by the public books, or any other evidence, the want or absence of the certificate can be no objection to the claim of the original creditor.
4. The certificate, when first delivered to the public creditor, being made payable to the bearer, and expressly fitted and calculated for circulation or exchange, like other bills of public credit, comprised and carried in it some value as long as it could be sold, but, like all other articles of negotiation or exchange, that value was liable to variation according to the rise or fall of the market.
From the two last propositions it clearly follows, that when the certificate was sold, all the value which it comprised or carried in it was sold and transferred with it, and no more; and of course, the purchaser, by the sale, became entitled to that value, and no more: the rest of the debt staid behind, and stuck fast to the original merits out of which it originally grew, and in the place where it always belonged, i. e. the original creditor, by the sale of his certificate, sold and granted all that he received, and no more; and that part which he had not received, he retained, and has a right to call for and receive, whenever he pleases.
5. A reference to the real design of Congress in issuing the certificates, especially at the close of the war, may cast some light on this affair. We are not to suppose that Congress issued negotiable certificates for 40,000,000 of dollars, worth but 2s. 6d. or some such trifle, in the pound, with real, serious design to load the nation with the immense burden of redeeming them at 20s. in the pound, wholly for the benefit of the bearers; by far the greatest part of whom, they had every reason to suppose, would be strangers not only to the merits, out of which the debt certified originally grew, but to any such services, or even kind wishes, for our country, as could deserve the public notice; and many of them strangers to the country itself.
We never ought to impute bad intentions, especially to public bodies of dignity, where their actions will equally well bear a favorable construction. I think, we are rather bound in charity to suppose, that, as Congress sound the public treasury so exhausted that it was impracticable to make even a small, partial payment to the public creditors, they might think that negotiable certificates would fell for something, which, tho’ little, might be better than nothing, and afford some relief, till the country could recover a little from the ruins of the war, and arrange the finances into some productive state, which would supply funds sufficient for full payment; and that, in the mean time, they might safely trust to the wisdom of a future Congress, to adopt modes of redemption of such certificates, either similar to their own scales then in established practice, or some other which might do justice to all, or at least something near it, and bring ruin on nobody, nor even disappoinment; for such a limited redemption was expected by every body at that time.
They had been long accustomed to issue public paper with the public faith plighted in words expressive and solemn enough, which yet, by their own scales and by general acceptation, were reduced, in construction or meaning, down to the current value or exchange which their paper obtained; and when they issued the certificates in question, I have no doubt but they considered themselves merely pursuing their long usage or practice, and conceived that the public paper they then issued, with all the rest that preceded it, would, in time, find and meet some reasonable mode of liquidation and final redemption, tolerable to all, and ruinous to none.
In this view of the matter, tho’ the means they adopted may not be deemed altogether proper (and perhaps, under the public pressures and necessities which then existed, no means could be hit on wholly free from exception) yet their intentions may be admitted to be just, salutary, and benevolent, and agreeable to the general expectation.
Whereas, on the other hand, to suppose them deliberately loading the States with a debt of 40,000,000 of dollars, for only 5,000,000 which they received and had the benefit of, is monstrous, which becomes still more hideous, if this horrible plan was designedly so formed that, by its natural operation, it would, in the end, cut all such of the original creditors who took benefit of it, off from 7-8ths of their pay or the debt certified to be due to them. But,
6. To suppose that the whole debt due to the original creditors is comprised in their certificates, and transferred by the sale of them to the purchasers, by the common rule of assignments, I say, this supposition will demonstrably prove either that the common rule of assignments is wrong and bad in itself, or wrongly applied to this case: but wrong in itself it is not; for it is plainly enough very good and useful in its place, i. e. within its due mean and reason; therefore, in the case in question, the application is wrongful, i. e. the rule will not admit a reasonable application to the facts, on which its operation is demanded.
For every law divine and human, every practicable rule of morality or sound policy, is and must most necessarily be founded on justice and right, and, in its application, must produce justice and right, and avoid injury and wrong; therefore, whenever any law or rule, however sacred in itself, is applied to any facts or case to which it so ill suits, that its necessary and unavoidable operation will be to destroyright and justice, and to produce wrong and injury, the application is certainly wrongful: in such case, the true use and meaning of the rule is mistaken or perverted.
All laws of every country are so capable of application to cases which are out of their reason, that a Court of Chancery makes a part of every judiciary system; the authority and duty of which is to control and soften the extreme rigor of the law; and when any stature or other rule is of so high authority that the powers of the court, do not extend far enough to give relief, application is and ought always to be made to the supreme authority, which is ever the supreme chancery of the State, to repeal such law, or explain and limit its true meaning, and correct the errors and wrongs of it.
Now to apply the foregoing position (which certainly no man will controvert) to the case before us—The opinion in dispute, ‘that the sale of a certificate transfers the whole debt certified, to the purchaser, by the common rule of assignments,’ cannot be true, because this would necessarily involve and imply great wrong and injustice, viz. it would take away the rewards due to the merits and earnings of our most meritorious citizens, and give the monies due to them to another class of people, who are not entitled to any of it by any kind of valuable considerations, merits, or earnings whatever, i. e. it would cut the original public creditors, who, by their merits and services, supported the war and saved their country, off from the rewards, the pay, the hire due to them, and give the same to the speculators, who never served or saved the country, and to whom we owe nothing.
This takes the public money to an immense amount, from a vast number of most deserving citizens, scattered thro’ every part of the Empire, who have dearly and most virtuously earned it, and have never been paid, and many of whom, with their families, for want of their pay, are now suffering the pangs of ruin and extreme distress, and all suffer great inconvenience and disappointment; I say, from these worthy, unhappy objects it takes the public money due to their earnings, and gives it to speculators, who have never earned any of it.
These effects are unavoidable. Turn, and twist, and cook the matter into all shapes possible, and these effects will be found. They must and will exist, if that plan is carried into effect; the great injustice of which strikes every one with a force which the mind cannot resist. No man ever adopted that plan, but he found the gross, but unavoidable, final injustice of it a great difficulty, hard to be got over; and this final injustice proves as plainly that the plan which involves it, is wrong, as that any effect indicates the nature of its cause, or that that which does or works wrong, is wrong: of course, there is an error in the matter so very gross and important as to be fatal in society. Society cannot exist, if the laws of it will not secure to the laborer his hire, or to the vircuous the rewards of his virtue, or to the industrious the fruits of his industry.
In fine, the facts under that plan stand glaring thus: the original creditors claim their pay by solemn, public contract, by dear earnings, and most virtuous merits; they have not been paid; the money due to them is carved out of the labors of the nation, in order to pay them; they can get none of it, are finally cut off from it, and the speculators are to get it all, without the least claim of merit, services, or valuable consideration paid for it.
These facts must be either disproved or avoided (which cannot be; they are of the most public notoriety) or the absurdities and injuries resulting from them must be swallowed and digested (Good Heaven! what throats and stomachs men must have to do this!) or the plan must be given up.
Many people puzzle themselves to find where the error or wrong lies: some say, in the breach of the public faith; some say, in the original issuing the negotiable certificates; others say, in the folly of the seller, &c. &c. but I should think it very easy to see that the error lies in supposing that property can be transferred by implication, without any intention of the seller, and without any valuable consideration paid for it.
But it matters little where the error or wrong lies; it is quite enough to know that it really exists, and will produceits baneful effects, and is of such magnitude as to affect the essential interests of the nation, and will do so for ages to come; and, therefore, as soon as the error is discovered, it ought immediately to be corrected or remedied: the national safety, peace, and prosperity require this.
If we sow all over the nation errors and wrongs, they may be unnoticed at first, but will soon spring up and grow into a forest of chagrin and discontent, of wretchedness and ruin. Nothing can give peace and establishment to a nation, equal to ‘judgment and justice running down its streets, and righteousness overflowing it.’
It is not uncommon for men of lively genius and eager reasonings, and perhaps honesty too, to pursue their fine-spun arguments into conclusions that meet obstinate facts, which, like an impregnable wall, must and will stop their progress; but if their obstinacy happens to be equal to that of the wall, they will not be willing to turn about, or even stop, but will go on and beat and bruse their heads till their skulls are broken, and some crevice is opened, thro’ which their chimerical ideas can fly out; then, indeed, they will soften into calmness and moderation, and grow willing to hearken to some plan that is admissible by the hard facts which stand round them.
I heard once of a doctor who was called to a sick patient; he felt his pulse, soon thought he found his disorder, and prescribed a dose which killed him. When the doctor was told his patient was dead, he answered with some emotion, that he had no business to die; for he could demonstrate by the most approved rules of physic and medicine, that he ought not only to have lived, but to have got well by this time.
Now, if you please, we will seriously compare this plan in question with mine, which is comprised in my first proposition, viz. to debit the original creditors with the certificates they received, at the value or exchange they bore at the time of their dates, and to pay the residue of the balance due to them with interest, and to pay the certificates at the same value or their current exchange (as the case may require) to the bearers of them, whether original holders or alienees; and let us judge of the two plans by this most sure and unexceptionable criterion, viz. which of them will naturally operate by way of most justice and right, and least injury and wrong? for no practicable plan that can be adopted, every one will allow, will operate by way of perfect right and no wrong at all; no public plan that ever was adopted ever came or can come up to this degree of perfection, and all that is or can be in the power of human wisdom and weakness is to adopt that plan, which, in its operation, naturally produces most right and least wrong. By this criterion then we will judge of the two plans before us, which criterion is (all subtilties of reasoning aside) the only safe one which is practicable within the extent of human power.
1. The plan I oppose pays the immense sum of public money given by the nation purposely to reward the saviours of their country, pays this money, I say, to the speculators, who never earned any of it, who do not pretend to found their claim to it on any merits, or services, or valuable consideration, which they ever rendered to the nation or any body else, but demand the compensations and rewards due to the original creditors, without pretending to have paid any valuable consideration therefor to them; and at the same time, the plan denies those immense rewards to those worthy citizens, who found their claim thereto on the most sacred contract of Congress to them, under sanction of the public faith, which binds the country “by the laws ofGodand man;” on the most punctual fulfilment of said contract, on their part; and on their great virtue and merit, in saving their country in its most dreadful danger and distress: if any body thinks there is any honor, justice, or right in this plan, let him look for it, and I believe he will easily find all that is there.
2. The plan I propose is, to debit the original creditors with all the certificates they received, at their current value at the time of their dates, and pay the remaining balance due to them with interest; and to redeem the certificates by payment to the bearer, let him be either original holder or alienee, at the same rate, or at their current exchange at the time of redemption, as the case may require.
This plan pays the immense public monies to the people who earned them, i. e. to those who, by solemn, public contract, and by their real supplies and services rendered as the conditions of that contract on their part, are most justly and substantially entitled to them; and, at the same time, pays to the speculators the proper value of the certificates which they have purchased.
This plan, I think, will do the most general justice to the citizens at large, which can be done by imperfect human wisdom, in the present circumstances of the matter. This will place the public monies where they belong, will give every one his due, and no more than his due. This will bring, on one side, wrong and ruinous distress on nobody; nor will it, on the other, heap unmerited, unearned fortunes on any body. This will, in the end, do manifest justice and right to every one. This ought ever to be our goal, whatever confusion, doubt, and darkness may arise from the chaos of subtile arguments, dexterity of management, and artful disguising and twisting of facts, thro’ which we may be forced to make our way in our passage on to this realm of justice, truth, and light: for whatever dark and gloomy passages we may have occasion to pass thro’, in the deliberation and adjustment of human concerns and disputes, final justice and right ought ever to be the star that directs our steps, and which will certainly guide us to the rightful issue at last.
I cannot see that this plan will bear hard on more than two sorts or descriptions of men, viz.
1. Such public creditors who have real merits and just right to a claim, but, by some means, may not be able to prove their right; and probably, among the insinite number of real public creditors, there may be some of this sort, and perhaps many, who must suffer without remedy; for what cannot be proved, cannot be admitted in any court in the world; but then it is to be noted, that the plan I oppose leaves these sufferers as much unprovided for, and as much despevate and without remedy, as the plan I propose, and, of course, this objection lies with equal weight against both plans, if it is of any weight against either of them.
2. The second sort of men who may think my plan imposes hardship on them, are such speculators as have purchased their certificates at a higher exchange than that at which I propose to redeem them; but this loss or hardship (if it is any) is and always must be incident to such speculations, which, at best, are but games at hazard, altogether useless, barely tolerable, and often very hurtful to the public: I do not, therefore, conceive their loss or gain deserves any consideration in the public deliberations or decisions of this great question, viz. what rate or scale of redemption of certificates, Continental money, or any other public paper, does the general justice, and national honor, and safety of our country, require? But if we were to allow that the losses and hardships of these men were real and pitiful, they bear not the leaft proportion to the infinite hardship and ruinous distresses, to which the plan I oppose subjects countless thousands of our most deserving citizens; even if the calculation is made on either the numbers, amount of loss, or the merits, of the sufferers.
If this alternative cannot be avoided, it can admit no doubt but the lesser must yield to the greater; for it is certainly a less evil to incur the loss of a penny than a pound, or even to do injustice to one man than to a thousand; and of two evils we ought to choose the least.
But the morality of the two plans, i. e. the degree of justice and right, or of injury and wrong, which their operation will naturally produce, is not the only thing which ought to govern our choice of them; there is a most important difference both of facility of collection and utility of payment, under them. For,
I. Under the plan I propose, the public money paid will be scattered over the whole nation, thro’ every part where the real public creditors will be found; and the money so paid will,
1. Do an act of justice long due to the receiver:
2. Will increase the business of the country; as most of the creditors will be thereby enabled to go into or increase their business, who are now restrained and held back, thro’ want of their stock withheld from them by the public.
3. This money will immediately spread thro’ every part of the nation, and cause a great increase of circulation, which will give spirit and facility to the general industry and wealth of our people at large; and as the taxes are all ultimately paid by the consumers, who are spread over every part of the country,
4. The facility of collection of the second tax will grow out of the operation of the first, as the payments will be made more easy and satisfactory thereby; for the people will naturally grow contented under a tax, when they perceive advantages arising out of the increased circulation of cash produced by it, enough to compensate the burden of the tax.
II. But under the plan I oppose, the case will be greatly otherwise; for,
1. One third of the speculators are supposed to be foreigners, and, of course, their third of the money paid (say, 7 or 8,000,000 of dollars) will be sent directly out of the country, never to return again; this drain of cash by annual interest (for nobody thinks of paying the principal) when added to that of the foreign debt, is enough (if we had no other drains) to keep the country poor, distressed, and behind hand for ages to come.
2. The other two-thirds paid to the speculators here, will not be scattered over the country, and increase the general circulation, but will be accumulated in few hands, most of which, according to the common course of human passions, will be applied to make and support nurseries of vice, luxury, pride, vanity, dissipation, and bad example: for fortunes obtained by sudden acquirement, without any merits or earnings, are usually spent in this way; and if a few of them should happen to employ their money prudently, it will so far contribute to accumulating the national wealth into few hands, which is one of the worst things that can happen to a nation.
III. Another difference of the operation of the two plans will have great effect on the revenue. When the public money is paid for purposes of acknowledged justice, utility, and general advantage, the payment of taxes will be made without murmur, and the collection, of course, will be easy and without disturbance. Paying to the original creditors the hire of their labors, the debt due to them for exertions that saved their country, is a method of employing the public money of most acknowledged propriety thro’ the nation; but the payment of speculators is not so popular; it is hard for people to see the fruits of their labor taken from them, and given to speculators who never earned any of it.
This will naturally make the taxes odious; and, of course, the burden of the old taxes, the instituting of new ones, and the collection of both, will soon become objects of general uneasiness, murmur, and ill-humor; which, when general, will be easily blowed up into tumults, insurrections, and a general derangement of the peace and political order of society; smuggling and other avoidances of the taxes may not be the most alarming of these national frets.
In a nation thus tempered, a few men of spirit and enterprise, who may happen to be disgusted, soured with malevolence, and fired with thirst of revenge, may do infinite mischief.
Without the aid of any such incendiaries, I am persuaded beyond a doubt, that any tax to pay the speculators will sit very uneasy on the most quiet and peaceable citizens that can be found among us.
I was lately in conversation with a gentleman of great fortune, and noted for a very generous and peaceful temper, who told me he had just been paying an impost of about 30 dollars for wines he imported for his own use, and added, “had it been to pay our soldiers and other supporters of the war, I should not have begrudged it, had it been three times as much; but the thought that it must go to the idle speculators, makes my blood boil in my veins:”—and I conceive, every honest American that earns his own money, feels just so.
Taxes are ever ranked among the most techy articles of civil police, and require very delicate management; and our revenue-system is very young, tender, and not ripened enough into firm, general habit; and, tho’ in its infancy, it is pressed with a much heavier load than the country ever felt before; I therefore conclude, that any plan that tends to embroil the finances, and furnish objections and murmurs against the revenue, ought to be reprobated as the most dangerous and fatal measure that can be devised.
IV. There is another objection to the plan I oppose, which I consider very great, and which, I think, is obviated by the one I propose, viz. it encourages and supports idle and hurtful arts and contrivances to procure fortunes by dexterity and sleight of hand, rather than by the old, painful methods of industry, economy, and care. These speculators all have for their object, the acquirement of wealth without earning it, i. e. of getting the hire and rewards due to the labor and merits of another, into their own possession and enjoyment, without any retribution: this therefore is, in its nature and principle, wrongful; and people of this cast commonly spend their stock and time in these pursuits, which, otherwise, they would employ in useful occupations of husbandry, manufactures, or trade; and, of course, so much good stock and time is lost to the public.
I think, this sort of speculations ought not to be considered as merely useless, but hurtful also, and, therefore, ought by no means to be encouraged and supported by any measures of government; especially when their excess has been carried to such an enormous pitch, as to draw after it the ruinous consequences described above, and obvious to every discerning eye.
V. My next objection to the plan I oppose, arises from the general state of the finances of the nation, which I beg leave to introduce, with some previous observations by way of preface.
1. I am not alarmed at a heavy national debt; much less do I apprehend any destruction or ruin from it, if not too enormous; nor,
2. Am I under any doubt or diffidence of either the strength or patience of our people to bear it, if the following limitations and qualities of it are attended to:
1st. If the debt contracted, or the public monies to be paid, are for necessary public purposes, i. e. to support and maintain the real justice, honor, safety, convenience, and well-being of the nation, e. g. to pay the civil list and just debts, for defence against enemies or pirates, for public roads, inland navigation, encouragement of genius, useful arts, &c. &c. &c.
2d. That the debt or annual demand for money does not exceed the product of an impost on imported luxuries, no higher than is necessary to reduce useless, luxurious, and hurtful consumptions down to that moderation that is necessasary for the health, morality, and wealth of our people; and,
3d. That the money collected by the tax shall be so paid out, that it may revert in its circulation to, and diffuse itself over, the same States and places out of which the money so collected was originally drawn, i. e. that the expenditures or payments of the money raised by the tax, shall be so made, that it shall revert to and circulate thro’ the same countries and places that paid it.
Under these limitations and restrictions, strictly and uniformly adhered to, no national debt can hurt, much less ruin, a nation; it would, in my opinion, operate like a sumptuary law, and would be rather an advantage and benefit on the whole, than a detriment. But this notwithstanding, I should choose to have the calculations made so, that the annual incomes might a little exceed the expenditures, that there might be a small surplus left to support accidents, or contingencies, or, as the country proverb is, that something might be laid up for a rainy day; but I would not wish to have such surplus very great, for if it was so, I should expect that most administrations would find plenty of contingencies, enough to consume it all—I will now go on to consider the present state of the public debt, as it is exhibited in estimates calculated up to the last of the year 1790.
The certificates of all sorts, now in circulation and to be provided for, amount, by the public estimates, principal, to 27,000,000 dollars; interest due last of the year 1790, to 13,000,000; whole amount, 40,000,000 dollars.
By a moderate estimate, and much below what is generally supposed to be the real fact, three-fourths of these, i. e. 30,000,000 dollars, are in the hands of the speculators; the original value of which, when issued by Congress, at an average of 2s. 6d. in the pound, amounts to 3,750,000 dollars; this sum, of course, was paid by the speculators to the real creditors, at the first purchase of them, and, therefore, ought to be placed to the debit of their account; the remainder of the 30,000,000 dollars, viz. 26,250,000 is the clear gain of the speculators, which they never paid any thing for, either to the nation, to the original creditors, or to any body else; therefore, that sum, having never been paid by any body, still remains due to the original creditors, and ought to be provided for, and, of course, ought to be added to the estimate of the national debt, viz. 26,250,000 dollars.
The national debt then, in round numbers (for my calculation does not require accuracy enough to make it necessary to insert the broken or fractional quantities) the national debt, I say, as calculated up to the end of the year 1790, will then stand, in round numbers, nearly as follows, viz.
From this statement it appears, that the whole present revenue is less than two-fifths of the yearly expenditures; a little more than two-fifths of it are absorbed by the civil list and interest of the foreign debt, and about two-thirds of the remainder are appropriated to pay the clear profits or gains of the speculators, and the debts due to the original creditors come in for the other third, but by such an unequal distribution, that far the greatest part of them get nothing at all, and those who do come in for something, get but two-thirds of the debt confessed by every body to be due to them.
For the truth of this statement I appeal to the public books, estimates, calculations, and records, except my estimate of the exchange or value of certificates, which is a matter of public notoriety, and I leave any body to correct it, who can.
Out of this statement, I think, arises a very strong objection against the plan I oppose. I think it is manifestly wrong, especially in the distressing straits and deficiency of the revenue, to bestow 26,000,000 of the living funds which the revenue can supply, on the speculators, who never paid any thing for it, either to the nation, or to the original creditors, whilst there remains due to said creditors a debt of above 50,000,000, which is not only unpaid, but totally unprovided for; and especially when it is considered, that this neglected debt is originally founded on the most solemn, public contract, and the most faithful and painful fulfilment of it on the part of the creditors.
I do not at present advert to any but the following questions, that can arise on this statement of the public debt and the existing revenue.
The first question to be considered is,—whether this statement is wild and ideal only, or really true and grounded on such facts as will support it? For my part, I have not any particular knowledge of the facts on which it is grounded, and, of course, do not object to any of it, except that part which adopts the clear gains of the speculators into the public debt, and loads the nation with the burden of 26,000,000 dollars to pay them, and of 800,000 more, to raise the old Continental money out of the grave where it has quietly slept more than seven years.
The second question which offers itself is,—whether any part of the public debt, included in the above statement, can be reduced, docked off, or thrown out? There are but two items which, I conceive, can admit a doubt in this question:
The first is,—the 26,000,000 dollars appropriated to the payment of the clear gains of the speculators. This, I think, ought to be rejected for all the reasons assigned above.
The second is,—the balance of the same sum due to the original creditors. I think (whatever may be decided as to paying or rejecting the clear gains of the speculators) this item of the statement ought to be admitted and paid, for all the reasons above urged, and this additional one, viz. the character of the nation abroad for justice and honor, requires this.
For let us suppose that one of our embassadors at a foreign court should, in some grand circle, happen to harangue a little on the justice, honor, political constitution, strength, riches, and blessings of his country, and some grave man, with much meaning in his countenance, should reply to him—“Sir, all you say of the blessings of your country, may be true for any thing I know; but it seems to me, the justice and honor of it are not quite so clear; for I think I have heard that your Congress refused to pay to those noble and patriotic citizens, who, with their blood and travail, purchased for you all these blessings you boast of, the rewards, the simple hire due to them by the most sacred, public contract that could be made, and faithfully fulfilled on their part, by exertions and services, the most noble, arduous, painful, and persevering, of which we have any example in history.”
I suppose, in such a case, you would not wish to see our embassador dashed out of countenance, pocket the affront, and slink into a corner; but if you think some reply necessary to bring him off, and as he may not have one ready cut and dried at hand, I wish any of you who oppose this payment, would make a suitable one for him, that he may be properly armed at all points to defend the honor of his country, whenever it may be insulted or attacked.
Third question. As the present revenue amounts to less than two-fifths of the yearly expenditures, according to the above statement, the next question is,—can the revenues be increased up to the amount of the necessary annual expenditures? i. e. can the duties or taxes be raised up to three-fifths higher than they now are? I conceive this will be difficult in the assessment, and more so in the collection; indeed, it appears to me totally impracticable, as things stand at present; and the idea of deferring payment, and loading the nation with an instalment to be paid ten years hence, brings to my mind a young rake, who bought a horse, and agreed to pay for it “at the next election,” but surreptitiously drew the note payable “at the resurrection;” the creditor applied for payment; the rake plead that the time was not come; on which the creditor applied to his father, who was a grave, serious man; he called his son, and asked why he did not pay the debt; the son replied, that it was not yet due, as he would see by the note; the father replied, “Ah! young man, pay the debt instantly; I fear, at the rate you go on, you will have enough to answer for at the resurrection, without this note against you.”
Fourth question. If the revenue is not adequate to full payment, ought not the actual payments to be made by dividends, payable to every creditor in equal proportions of the debt due? In such case, to pay part of the creditors halfor two-thirds of their demand, and nothing to the rest, is contrary to the most received rule of distributive justice, in all cases of private bankruptcies or stoppages of payment, and I can see no reason why the same rule should not extend to the deficiencies of the public revenue.
Fifth question. If the public revenues are deficient, ought any creditor at all to be paid any thing, till the whole debt is liquidated and reduced to a certainty, without which it is impossible to make the requisite dividends? A negative answer to this question seems to be so clearly just and proper, that I cannot conceive that it will be disputed.
But after all, if the first proposition of my plan above urged cannot be admitted, and the final decision must be, that the original creditors who have sold their certificates, have, by the fale, extinguished their demand for any further payment; that no evidence of the debt can be admitted, but certificates; and no payment of the debt certified in them, can be allowed and made to any body but the holders of them (all which appears to me to be strange doctrine) I beg leave, if this must be the case, to introduce my second proposition, viz.
That all original holders of certificates be paid the full nominal value of their certificates, principal and interest; and that all alienated certificates be paid to the bearer at the rate, value, or current exchange they had at their dates, or at the time of redemption, as the case may require, i. e. so that no certificate shall be redeemed at a higher value or exchange than it bore at the time of its date, or (if, after its date, it depreciated) at no higher exchange than shall be its current value at the time of redemption; for the public never received any valuable consideration for it, more than its value at the time of its date, and therefore never ought to pay any more to redeem it; but if it has depreciated thro’ the course of its currency or circulation, the public has paid that depreciation once already, for it operates by way of tax on the innumerable hands in which it depreciated, i. e. on the public, thro’ which it circulated; and there can be no reason why the public should pay the same loss over again; and if they should do this, it would be no reparation to the sufferer; for, at the time of doing this, the certificate would not be in the same hands which suffered by the depreciation: but this argument is more fully discussed in the preceding Essays, where the doctrine of appreciation and depreciation is often called up and considered.
The certificates are evidence of the debt certified, in the hands of the original holder, and my proposition is, to pay it to him: but in the hands of the alienee it carries not any such evidence, for it is plain enough, both in fact and reason, that, by the fale of the certificate, nothing more was either transferred by the seller, or expected or paid for by the purchaser, than the chance or right of receiving such sum or value for it, as the Congress should set or fix as the price or exchange at which it should be finally redeemed; and this rate or scale of redemption ought to be set or estimated without the least regard to the loss or gain of the speculators; but on principles of general justice and right only, i. e. in such manner as will do most right and least wrong, i. e. in such manner, that no description of citizens should be more benefited or hurt, or made richer or poorer, by it, than another; for all national distributions of justice, all public institutions and decisions whatever, ought always to be so made, that both the burdens and benefits of them may fall equably on all, and not lie more heavily or more beneficially on one than another, i. e. so that every one shall participate his clear and proportionable share both of the burden and benefit of them.
The rate or scale of redemption, thus estimated and fixed, will manifestly pay to the speculator all that he has right to receive, i. e. all that he ever bought or paid for; and if the overplus may not be paid to the original creditor, let it be retained in the treasury, and be paid to nobody; for I cannot see the use of paying it at all, where it is not due.
This proposition (which I advanced five years ago in my Seventh Essay on Finance) gave rise to the great question of discrimination between original holders and purchasers of certificates, and has been so fully discussed, that little need be added in this Review of the Arguments.
Perhaps it may be enough to observe, that most of the opposers of the proposition acknowledge the justice of it, but object to it at impracticable. But I can see very little weight in the objection; every one who claims as an original holder, must discriminate himself, i. e. the proof will lie on him that he is such. I should suppose, that his name inserted in the certificate, and his affidavit that he has never alienated it, would be sufficient. If the certificate was taken out for his benefit in the name of another (as perhaps has been often done) the balance due on the public books, and the certificate debited to him, with his own affidavit, would make the matter clear enough; besides, the negotiator of such a matter would be a good witness.
There is no more danger of perjuries in this case, than there is in oaths to original entries on books of accounts, to signatures, &c. &c. After all, there can be but very few cases, if any, where the plan I oppose can give any more or better remedy to creditors who have lost their proofs, than the one I propose affords.
My last proposition is,—if neither of the above-mentioned two can be admitted, that the original holder shall be first paid, and the speculator last of all, if he must be paid at all. The reason is, because the debt of the original holder is founded on greater merits and real earnings than the other, and, therefore, ought to be considered as of a higher and more worthy nature, and, of course, ought to be preferred in payment.
Upon the whole matter, I have no conception that the present arrangement of the public finances, i. e. of receipts and payments, is by any means adequate to the exigencies of the nation. I cannot form any idea, that our revenue either is or can be made sufficient to support the immense load of debt which lies upon it: nor can I conceive how any nation can exist without the utmost deficiencies, disgrace, and even bankruptcy, where the drafts on the revenue so greatly exceed the annual incomes of it; can exist, I say, without running over head and ears into the horrible gulf, the unbounded chaos of derangement, which will draw into it every conceivable embarrassment, not only of the public revenue, i. e. of the justice and honor of the nation, but which will also, by its necessary consequence, involve every branch of business thro’ the whole nation in disappointment and distress.
Deferring payments to future time is but putting far away the evil day, and avoiding the pain of present pressures, at the expense of future embarrassment. The unavoidable consequence of an over-loaded revenue will be a deficiency of the public payments, i. e. a failure of the public credit, and of the justice and honor of the nation.
But in our own case, this is not all our calamity; for, under all this pressure of taxes, we can derive little improvement of our country, or even safety and security, from them: this immense gulf of debt swallows up all our revenues, and is by no means satisfied with them all; it leaves us not a shilling for public roads, inland navigation, encouragement of agriculture, manufactures, or genius of any sort, or even for defence against enemies or pirates, in case of a war; all the navy of the nation is not sufficient to suppress a pilot-boat, if it should be armed and manned by pirates to insult and infest our coasts.
But this is not all; our people have not the benefit of that increased circulation of cash, which would arise from the heavy taxes they do pay, if the payments were made to creditors scattered over the nation, who would instantly circulate the money they received, among the same people from whom it had been collected; but our money goes to strangers, or to such accumulations, that it is carried off far beyond our reach for ever, after we have paid it in taxes.
In fine, it is not possible that our nation should continue even to exist in honor, ease, and peace, under these burdens; a penny can never pay a shilling, and a shilling due will ever be a debt, and a fretting one too, till it is paid. The nature of our calamity admits but two alternatives, viz.
Either to reduce the debt by docking off some part of it, or to increase the revenue up to an amount sufficient to pay it: the latter I take to be utterly impracticable and desperate, as the matter now stands; the other, I think, might be done. The only part of the estimate of the national debt that is not for the nation’s benefit, is the 26,000,000 dollars appropriated to pay the clear profits of the speculators. This, I think, might be spared out of the estimate, but as it is funded, I think it cannot be well docked off without a repealof the funding act, which I humbly wish may take place. I know there would be great difficulties in doing this, but I conceive there will be much greater difficulties in not doing it. I am confident, the act, when it begins to operate, will be found, in its nature, wrong and impracticable, and necessity will compel the rescinding it sooner or later, and it is much easier to correct a new error than an old one; it is more honorable to correct an error with readiness of mind on first conviction, than to wait for the severe compulsions of necessity.
But if the repeal of the act should be thought improper, perhaps a supplement fixing a reasonable rate or scale of exchange at which the certificates and Continental money shall be received into the new loan, might prove a very salutary amendment of it: and if I could believe that any thing less than the nation’s well-being made this repeal or amendment necessary, I should be silent about it.
Any attempt to pay this vast sum twice over, would draw consequences the most destructive and ruinous that can be conceived; and if both cannot be paid, and we cannot avoid the alternative, I would prefer sacrificing a demand which never originated in real merit or earnings, but receives its whole force from an extravagant implication of a meaning in words, which, by construction of speaker or hearer at the time of utterance, was never comprised or conveyed in them; I say, I would prefer this to any violation of the solemn contract, the sacred public vows, sealed and plighted to the orinal creditors, in the time of our country’s utmost danger and deep distress, and to whose faithful and painful fulfilment of that contract on their parts, we are indebted under God for our deliverance.
If the first part of this alternative can be adopted, our desperation may cease, the great difficulty will diminish, partly because a large and the most exceptionable part of the burden will be taken off, and partly because what is left will be a debt of such acknowledged and uncontroverted right, justice, and honor, as will give courage and force to our councils to assess, and our people to bear, such burdens of tax as will be necessary to support it, and gradually to wipe it off.
It is human to err, but it is the decided mark of strong intellects and a generous temper, to acknowledge and correct an error on conviction; yet such is the common weakness of the human mind, that error is often connected with obstinacy; those who are weak enough to make mistakes, are rarely wise enough to correct them; and the hard necessity which compels an amendment of an error, will not always produce an acknowledgment of it. The stability of public measures and decisions ought to rest on their rectitude and natural fitness, not on an obstinacy that is blind to their faults. Every body acknowledges that it is honorable and noble to own and correct an error, and that it is mean and base to persist in one; yet most men feel a sort of degrading shame, when they are called upon to correct their own mistakes. I hope our public councils are not affected with any of these little feelings: but, be it so or not, it is commonly true, that errors adopted on long deliberation are not easily given up and corrected. I do not wish to insinuate here, that any attention will be wanting to my arguments, drawn from religion and the fear of God (for his name has been called in to give force to the vows of the nation to their real creditors) or to arguments drawn from morality, national justice and honor, from gratitude and compassion, &c. these are arguments to be answered to God, to the nation, and to conscience.—But to wave all these for this time, I beg to conclude with the following questions, directed to every body:
First question. Whether paying the clear profits of the speculators, viz. 26,250,000 dollars, will not load and exhaust the revenue so much, as to put it out of our power to pay our real debts of the first honor, justice, covenants, and truth of the nation?
Second question. Whether this payment will not be matter of general disapprobation and disgust, especially when kept alive and fresh in memory, by the annual demand of above 1,000,000 dollars to pay the interest of it?
Third question. Whether denying payment to such of our citizens, who, by their virtue and efforts, saved our country, will not be matter of great dissatisfaction to our people, and discourage their future zeal and readiness to serve their country, when their services may be necessary?
It is the right as well as duty of every citizen, to use his best endeavours to avert his country’s dangers and impending distresses, whenever they appear threatening. Our country has a right to the wisdom as well as to the wealth of all its inhabitants, when the public exigence makes either or both necessary, and the right of the nation implies the duty of its citizens.
In discharge of this duty, I here offer my mite of wisdom, such as it is, to my country. If any one sentence of these Dissertations does not carry conviction, let it be rejected; but if my principles and arguments reach the heart, and compel the mind of the reader to yield to their rectitude and force, they will produce the effects I wish.
But whether I am gratified or disappointed, whether my country be saved or not, I have that consciousness of upright intentions and faithful endeavours for the salvation of the Union, which inspires me with the most satisfactory expectation, that I shall be glorious in the eyes of the Lord and of posterity.
A CITIZEN of PHILADELPHIA.
Philadelphia, Dec. 20, 1790.