CHAPTER VI.

Meeting of congress.... President's speech.... Report of the secretary of the treasury on public credit.... Debate thereon.... Bill for fixing the permanent seat of government.... Adjournment of congress.... Treaty with the Creek Indians.... Relations of the United States with Great Britain and Spain.... The President visits Mount Vernon.... Session of congress.... The President's speech.... Debates on the excise.... On a national bank.... The opinions of the cabinet on the law.... Progress of parties.... War with the Indians.... Defeat of Harmar.... Adjournment of congress.

{1790}

On the eighth of January, 1790, the President met both houses of congress in the senate chamber.

[Sidenote: Meeting of the second session of the first congress.]

In his speech, which was delivered from the chair of the vice president, after congratulating congress on the accession of the important state of North Carolina to the union, and on the prosperous aspect of American affairs, he proceeded to recommend certain great objects of legislation to their more especial consideration.

"Among the many interesting objects," continued the speech, "which will engage your attention, that of providing for the common defence will merit your particular regard. To be prepared for war is one of the most effectual means of preserving peace.

"A free people ought not only to be armed but disciplined; to which end, a uniform and well digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent on others for essential, particularly for military supplies."

As connected with this subject, a proper establishment for the troops which they might deem indispensable, was suggested for their mature deliberation; and the indications of a hostile temper given by several tribes of Indians, were considered as admonishing them of the necessity of being prepared to afford protection to the frontiers, and to punish aggression.

The interests of the United States were declared to require that the means of keeping up their intercourse with foreign nations should be provided; and the expediency of establishing a uniform rule of naturalization was suggested.

After expressing his confidence in their attention to many improvements essential to the prosperity of the interior, the President added, "nor am I less persuaded that you will agree with me in opinion that there is nothing which can better deserve your patronage than the promotion of science and literature. Knowledge is in every country the surest basis of public happiness. In one, in which the measures of government receive their impression so immediately from the sense of the community as in ours, it is proportionably essential. To the security of a free constitution it contributes in various ways: by convincing those who are intrusted with the public administration, that every valuable end of government is best answered by the enlightened confidence of the people; and by teaching the people themselves to know and to value their own rights; to discern and provide against invasions of them; to distinguish between oppression and the necessary exercise of lawful authority; between burdens proceeding from a disregard to their convenience, and those resulting from the inevitable exigencies of society; to discriminate the spirit of liberty from that of licentiousness, cherishing the first, avoiding the last, and uniting a speedy but temperate vigilance against encroachments, with an inviolable respect to the laws.

"Whether this desirable object will be best promoted by affording aids to seminaries of learning already established, by the institution of a national university, or by any other expedients, will be well worthy of a place in the deliberations of the legislature."

Addressing himself then particularly to the representatives he said: "I saw with peculiar pleasure at the close of the last session, the resolution entered into by you, expressive of your opinion, that an adequate provision for the support of the public credit is a matter of high importance to the national honour and prosperity. In this sentiment I entirely concur; and to a perfect confidence in your best endeavours to devise such a provision as will be truly consistent with the end, I add an equal reliance on the cheerful co-operation of the other branch of the legislature. It would be superfluous to specify inducements to a measure in which the character and permanent interests of the United States are so obviously and so deeply concerned; and which has received so explicit a sanction from your declaration."

Addressing himself again to both houses, he observed, that the estimates and papers respecting the objects particularly recommended to their attention would be laid before them; and concluded with saying, "the welfare of our country is the great object to which our cares and efforts ought to be directed: and I shall derive great satisfaction from a co-operation with you in the pleasing though arduous task of insuring to our fellow citizens the blessings which they have a right to expect from a free, efficient, and equal government."

The answers of both houses were indicative of the harmony which subsisted between the executive and legislative departments.

Congress had been so occupied during its first session with those bills which were necessary to bring the new system into full operation, and to create an immediate revenue, that some measures which possessed great and pressing claims to immediate attention had been unavoidably deferred. That neglect under which the creditors of the public had been permitted to languish could not fail to cast an imputation on the American republics, which had been sincerely lamented by the wisest among those who administered the former government. The power to comply substantially with the engagements of the United States being at length conferred on those who were bound by them, it was confidently expected by the friends of the constitution that their country would retrieve its reputation, and that its fame would no longer be tarnished with the blots which stain a faithless people.

[Sidenote: Report of the secretary of the treasury of a plan for the support of public credit.]

On the 9th of January, a letter from the secretary of the treasury to the speaker of the house of representatives was read, stating that in obedience to the resolution of the 21st of September, he had prepared a plan for the support of public credit, which he was ready to report when the house should be pleased to receive it; and, after a short debate in which the personal attendance of the secretary for the purpose of making explanations was urged by some, and opposed by others, it was resolved that the report should be received in writing on the succeeding Thursday.

Availing himself of the latitude afforded by the terms of the resolution under which he acted, the secretary had introduced into his report an able and comprehensive argument elucidating and supporting the principles it contained. After displaying, with strength and perspicuity, the justice and the policy of an adequate provision for the public debt, he proceeded to discuss the principles on which it should be made.

"It was agreed," he said, "by all, that the foreign debt should be provided for according to the precise terms of the contract. It was to be regretted that, with respect to the domestic debt, the same unanimity of sentiment did not prevail."

The first point on which the public appeared to be divided, involved the question, "whether a discrimination ought not to be made between original holders of the public securities, and present possessors by purchase." After reviewing the arguments generally urged in its support, the secretary declared himself against this discrimination. He deemed it "equally unjust and impolitic; highly injurious even to the original holders of public securities, and ruinous to public credit." To the arguments with which he enforced these opinions, he added the authority of the government of the union. From the circular address of congress to the states, of the 26th of April, 1783, accompanying their revenue system of the 18th of the same month, passages were selected indicating unequivocally, that in the view of that body the original creditors, and those who had become so by assignment, had equal claims upon the nation.

After reasoning at great length against a discrimination between the different creditors of the union, the secretary proceeded to examine whether a difference ought to be permitted to remain between them and the creditors of individual states.

Both descriptions of debt were contracted for the same objects, and were in the main the same. Indeed, a great part of the particular debts of the states had arisen from assumptions by them on account of the union; and it was most equitable that there should be the same measure of retribution for all. There were many reasons, some of which were stated, for believing this would not be the case, unless the state debts should be assumed by the nation.

In addition to the injustice of favouring one class of creditors more than another which was equally meritorious, many arguments were urged in support of the policy of distributing to all with an equal hand from the same source.

After an elaborate discussion of these and some other points connected with the subject, the secretary proposed that a loan should be opened to the full amount of the debt, as well of the particular states, as of the union.

The terms to be offered were,--

First. That for every one hundred dollars subscribed payable in the debt, as well interest as principal, the subscriber should be entitled to have two-thirds funded on a yearly interest of six per cent, (the capital redeemable at the pleasure of government by the payment of the principal) and to receive the other third in lands of the western territory at their then actual value. Or,

Secondly. To have the whole sum funded at a yearly interest of four per cent., irredeemable by any payment exceeding five dollars per annum both on account of principal and interest, and to receive as a compensation for the reduction of interest, fifteen dollars and eighty cents, payable in lands as in the preceding case. Or,

Thirdly. To have sixty-six and two-thirds of a dollar funded at a yearly interest of six per cent., irredeemable also by any payment exceeding four dollars and two-thirds of a dollar per annum on account both of principal and interest, and to have at the end of ten years twenty-six dollars and eighty-eight cents funded at the like interest and rate of redemption.

In addition to these propositions the creditors were to have an option of vesting their money in annuities on different plans; and it was also recommended to open a loan at five per cent, for ten millions of dollars, payable one half in specie, and the other half in the debt, irredeemable by any payment exceeding six dollars per annum both of principal and interest.

By way of experiment, a tontine on principles stated in the report was also suggested.

The secretary was restrained from proposing to fund the whole debt immediately at the current rate of interest, by the opinion, "that although such a provision might not exceed the abilities of the country, it would require the extension of taxation to a degree, and to objects which the true interest of the creditors themselves would forbid. It was therefore to be hoped and expected, that they would cheerfully concur in such modifications of their claims, on fair and equitable principles, as would facilitate to the government an arrangement substantial, durable, and satisfactory to the community. Exigencies might ere long arise which would call for resources greatly beyond what was now deemed sufficient for the current service; and should the faculties of the country be exhausted, or even strained to provide for the public debt, there could be less reliance on the sacredness of the provision.

"But while he yielded to the force of these considerations, he did not lose sight of those fundamental principles of good faith which dictate that every practicable exertion ought to be made, scrupulously to fulfil the engagements of government; that no change in the rights of its creditors ought to be attempted without their voluntary consent; and that this consent ought to be voluntary in fact, as well as in name. Consequently, that every proposal of a change ought to be in the shape of an appeal to their reason and to their interest, not to their necessities. To this end it was requisite that a fair equivalent should be offered, for what might be asked to be given up, and unquestionable security for the remainder." This fair equivalent for the proposed reduction of interest was, he thought, offered in the relinquishment of the power to redeem the whole debt at pleasure.

That a free judgment might be exercised by the holders of public securities in accepting or rejecting the terms offered by the government, provision was made in the report for paying to non-subscribing creditors, a dividend of the surplus which should remain in the treasury after paying the interest of the proposed loans: but as the funds immediately to be provided, were calculated to produce only four per cent, on the entire debt, the dividend, for the present, was not to exceed that rate of interest.

To enable the treasury to support this increased demand upon it, an augmentation of the duties on imported wines, spirits, tea, and coffee, was proposed, and a duty on home made spirits was also recommended.

This celebrated report, which has been alike the fruitful theme of extravagant praise and bitter censure, merits the more attention, because the first regular and systematic opposition to the principles on which the affairs of the union were administered, originated in the measures which were founded on it.

On the 28th of January, this subject was taken up; and, after some animadversions on the speculations in the public debt to which the report, it was said, had already given birth, the business was postponed until the eighth of February, when it was again brought forward.

[Sidenote: Debate thereon.]

Several resolutions affirmative of the principles contained in the report, were moved by Mr. Fitzsimmons. To the first, which respected a provision for the foreign debt, the house agreed without a dissenting voice. The second, in favour of appropriating permanent funds for payment of the interest on the domestic debt, and for the gradual redemption of the principal, gave rise to a very animated debate.

Mr. Jackson declared his hostility to funding systems generally. To prove their pernicious influence, he appealed to the histories of Florence, Genoa, and Great Britain; and, contending that the subject ought to be deferred until North Carolina should be represented, moved, that the committee should rise. This question being decided in the negative, Mr. Scott declared the opinion that the United States were not bound to pay the domestic creditors the sums specified in the certificates of debts in their possession. He supported this opinion by urging, not that the public had received less value than was expressed on the face of the paper which had been issued, but that those to whom it had been delivered, by parting with it at two shillings and sixpence in the pound, had themselves fixed the value of their claims, and had manifested their willingness to add to their other sacrifices this deduction from their demand upon the nation. He therefore moved to amend the resolution before the committee so as to require a resettlement of the debt.

The amendment was opposed by Mr. Boudinot, Mr. Lawrence, Mr. Ames, Mr. Sherman, Mr. Hartley, and Mr. Goodhue. They stated at large the terms on which the debt had been contracted, and urged the confidence which the creditors had a right to place in the government for its discharge according to settlements already made, and acknowledgments already given. The idea that the legislative body could diminish an ascertained debt was reprobated with great force, as being at the same time unjust, impolitic, and subversive of every principle on which public contracts are founded. The evidences of debt possessed by the creditors of the United States were considered as public bonds, for the redemption of which the property and the labour of the people were pledged.

After the debate had been protracted to some length, the question was taken on Mr. Scott's amendment, and it passed in the negative.

Mr. Madison then rose, and, in an eloquent speech, replete with argument, proposed an amendment to the resolution, the effect of which was to discriminate between the public creditors, so as to pay the present holder of assignable paper the highest price it had borne in the market, and give the residue to the person with whom the debt was originally contracted. Where the original creditor had never parted with his claim, he was to receive the whole sum acknowledged to be due on the face of the certificate.

This motion was supported by Mr. Jackson, Mr. White, Mr. Moore, Mr. Page, Mr. Stone, Mr. Scott, and Mr. Seney.

It was opposed with great earnestness and strength of argument, by Mr. Sedgewick, Mr. Lawrence, Mr. Smith, of South Carolina, Mr. Ames, Mr. Gerry, Mr. Boudinot, Mr. Wadsworth, Mr. Goodhue, Mr. Hartley, Mr. Bland, Mr. Benson, Mr. Burke, and Mr. Livermore.

The argument was ably supported on both sides, was long, animated, and interesting. At length the question was put, and the amendment was rejected by a great majority.

This discussion deeply engaged the public attention. The proposition was new and interesting. That the debt ought to be diminished for the public advantage, was an opinion which had frequently been advanced, and was maintained by many. But a reduction from the claims of its present holders for the benefit of those who had sold their rights, was a measure which saved nothing to the public purse, and was therefore recommended only by considerations, the operation of which can never be very extensive. Against it were arranged all who had made purchases, and a great majority of those who conceived that sound policy and honest dealing require a literal observance of public contracts.

Although the decision of congress against a discrimination in favour of the original creditor produced no considerable sensation, the determination on that part of the secretary's report which was the succeeding subject of deliberation, affecting political interests and powers which are never to be approached without danger, seemed to unchain all those fierce passions which a high respect for the government and for those who administered it, had in a great measure restrained.

The manner in which the several states entered into and conducted the war of the revolution, will be recollected. Acting in some respects separately, and in others conjointly, for the attainment of a common object, their resources were exerted, sometimes under the authority of congress, sometimes under the authority of the local government, to repel the enemy wherever he appeared. The debt incurred in support of the war was therefore, in the first instance, contracted partly by the continent, and partly by the states. When the system of requisitions was adopted, the transactions of the union were carried on, almost entirely, through the agency of the states; and when the measure of compensating the army for the depreciation of their pay became necessary, this burden, under the recommendation of congress, was assumed by the respective states. Some had funded this debt, and paid the interest upon it. Others had made no provision for the interest; but all, by taxes, paper money, or purchase, had, in some measure, reduced the principal. In their exertions some degree of inequality had obtained; and they looked anxiously to a settlement of accounts, for the ascertainment of claims which each supposed itself to have upon the union. Measures to effect this object had been taken by the former government; but they were slow in their progress, and intrinsic difficulties were found in the thing itself, not easily to be overcome.

The secretary of the treasury proposed to assume these debts, and to fund them in common with that which continued to be the proper debt of the union.

The resolution which comprehended this principle of the report, was vigorously opposed.

It was contended that the general government would acquire an undue influence, and that the state governments would be annihilated by the measure. Not only would all the influence of the public creditors be thrown into the scale of the former, but it would absorb all the powers of taxation, and leave to the latter only the shadow of a government. This would probably terminate in rendering the state governments useless, and would destroy the system so recently established. The union, it was said, had been compared to a rope of sand; but gentlemen were cautioned not to push things to the opposite extreme. The attempt to strengthen it might be unsuccessful, and the cord might be strained until it should break.

The constitutional authority of the federal government to assume the debts of the states was questioned. Its powers, it was said, were specified, and this was not among them.

The policy of the measure, as it affected merely the government of the union, was controverted, and its justice was arraigned.

On the ground of policy it was objected, that the assumption would impose on the United States a burden, the weight of which was unascertained, and which would require an extension of taxation beyond the limits which prudence would prescribe. An attempt to raise the impost would be dangerous; and the excise added to it would not produce funds adequate to the object. A tax on real estate must be resorted to, objections to which had been made in every part of the union. It would be more adviseable to leave this source of revenue untouched in the hands of the state governments, who could apply to it with more facility, with a better understanding of the subject, and with less dissatisfaction to individuals, than could possibly be done by the government of the United States.

There existed no necessity for taking up this burden. The state creditors had not required it. There was no petition from them upon the subject. There was not only no application from the states, but there was reason to believe that they were seriously opposed to the measure. Many of them would certainly view it with a jealous,--a jaundiced eye. The convention of North Carolina, which adopted the constitution, had proposed, as an amendment to it, to deprive congress of the power of interfering between the respective states and their creditors: and there could be no obligation to assume more than the balances which on a final settlement would be found due to creditor states.

That the debt by being thus accumulated would be perpetuated was also an evil of real magnitude. Many of the states had already made considerable progress in extinguishing their debts, and the process might certainly be carried on more rapidly by them than by the union. A public debt seemed to be considered by some as a public blessing; but to this doctrine they were not converts. If, as they believed, a public debt was a public evil, it would be enormously increased by adding those of the states to that of the union.

The measure was unwise too as it would affect public credit. Such an augmentation of the debt must inevitably depreciate its value; since it was the character of paper, whatever denomination it might assume, to diminish in value in proportion to the quantity in circulation.

It would also increase an evil which was already sensibly felt. The state debts when assumed by the continent, would, as that of the union had already done, accumulate in large cities; and the dissatisfaction excited by the payment of taxes, would be increased by perceiving that the money raised from the people flowed into the hands of a few individuals. Still greater mischief was to be apprehended. A great part of this additional debt would go into the hands of foreigners; and the United States would be heavily burdened to pay an interest which could not be expected to remain in the country.

The measure was unjust, because it was burdening those states which had taxed themselves highly to discharge the claims of their creditors, with the debts of those which had not made the same exertions. It would delay the settlement of accounts between the individual states and the United States; and the supporters of the measure were openly charged with intending to defeat that settlement.

It was also said that, in its execution, the scheme would be found extremely embarrassing, perhaps impracticable. The case of a partial accession to the measure by the creditors, a case which would probably occur, presented a difficulty for which no provision was made, and of which no solution had been given. Should the creditors in some states come into the system, and those in others refuse to change their security, the government would be involved in perplexities from which no means of extricating itself had been shown. Nor would it be practicable to discriminate between the debts contracted for general and for local objects.

In the course of the debate, severe allusions were made to the conduct of particular states; and the opinions advanced in favour of the measure, were ascribed to local interests.

In support of the assumption, the debts of the states were traced to their origin. America, it was said, had engaged in a war, the object of which was equally interesting to every part of the union. It was not the war of a particular state, but of the United States. It was not the liberty and independence of a part, but of the whole, for which they had contended, and which they had acquired. The cause was a common cause. As brethren, the American people had consented to hazard property and life in its defence. All the sums expended in the attainment of this great object, whatever might be the authority under which they were raised or appropriated, conduced to the same end. Troops were raised, and military stores purchased, before congress assumed the command of the army, or the control of the war. The ammunition which repulsed the enemy at Bunker's Hill, was purchased by Massachusetts; and formed a part of the debt of that state.

Nothing could be more erroneous than the principle which had been assumed in argument, that the holders of securities issued by individual states were to be considered merely as state creditors;--as if the debt had been contracted on account of the particular state. It was contracted on account of the union, in that common cause in which all were equally interested.

From the complex nature of the political system which had been adopted in America, the war was, in a great measure, carried on through the agency of the state governments; and the debts were, in truth, the debts of the union, for which the states had made themselves responsible. Except the civil list, the whole state expenditure was in the prosecution of the war; and the state taxes had undeniably exceeded the provision for their civil list. The foundation for the several classes of the debt was reviewed in detail; and it was affirmed to be proved from the review, and from the books in the public offices, that, in its origin, a great part of it, even in form, and the whole, in fact, was equitably due from the continent. The states individually possessing all the resources of the nation, became responsible to certain descriptions of the public creditors. But they were the agents of the continent in contracting the debt; and its distribution among them for payment, arose from the division of political power which existed under the old confederation. A new arrangement of the system had taken place, and a power over the resources of the nation was conferred on the general government. With the funds, the debt also ought to be assumed. This investigation of its origin demonstrated that the assumption was not the creation of a new debt, but the reacknowledgment of liability for an old one, the payment of which had devolved on those members of the system, who, at the time, were alone capable of paying it. And thence was inferred, not only the justice of the measure, but a complete refutation of the arguments drawn from the constitution. If, in point of fact, the debt was in its origin continental, and had been transferred to the states for greater facility of payment, there could be no constitutional objection to restoring its original and real character.

The great powers of war, of taxation, and of borrowing money, which were vested in congress to pay the debts, and provide for the common defence and general welfare of the United States, comprised that in question. There could be no more doubt of their right to charge themselves with the payment of a debt contracted in the past war, than to borrow money for the prosecution of a future war. The impolicy of leaving the public creditors to receive payment from different sources was also strongly pressed; and the jealousy which would exist between the creditors of the union and of the states, was considered as a powerful argument in favour of giving them one common interest. This jealousy, it was feared, might be carried so far, as even to create an opposition to the laws of the union.

If the states should provide for their creditors, the same sum of money must be collected from the people, as would be required if the debt should be assumed; and it would probably be collected in a manner more burdensome, than if one uniform system should be established. If all should not make such provision, it would be unjust to leave the soldier of one state unpaid, while the services of the man who fought by his side were amply compensated; and, after having assumed the funds, it would dishonour the general government to permit a creditor for services rendered, or property advanced for the continent, to remain unsatisfied, because his claim had been transferred to the state, at a time when the state alone possessed the means of payment. By the injured and neglected creditor, such an arrangement might justly be considered as a disreputable artifice.

Instead of delaying, it was believed to be a measure which would facilitate the settlement of accounts between the states. Its advocates declared that they did not entertain, and never had entertained any wish to procrastinate a settlement. On the contrary, it was greatly desired by them. They had themselves brought forward propositions for that purpose; and they invited their adversaries to assist in improving the plan which had been introduced.

The settlement between the states, it was said, either would or would not be made. Should it ever take place, it would remedy any inequalities which might grow out of the assumption. Should it never take place, the justice of the measure became the more apparent. That the burdens in support of a common war, which from various causes had devolved unequally on the states, ought to be apportioned among them, was a truth too clear to be controverted; and this, if the settlement should never be accomplished, could be effected only by the measure now proposed. Indeed, in any event, it would be the only certain, as well as only eligible plan. For how were the debtor states to be compelled to pay the balances which should be found against them?

If the measure was recommended by considerations which rendered its ultimate adoption inevitable, the present was clearly preferable to any future time. It was desirable immediately to quiet the minds of the public creditors by assuring them that justice would be done; to simplify the forms of public debt; and to put an end to that speculation which had been so much reprobated, and which could be terminated only by giving the debt a real and permanent value.

That the assumption would impair the just influence of the states was controverted with great strength of argument. The diffusive representation in the state legislatures, the intimate connexion between the representative and his constituents, the influence of the state legislatures over the members of one branch of the national legislature, the nature of the powers exercised by the state governments which perpetually presented them to the people in a point of view calculated to lay hold of the public affections, were guarantees that the states would retain their due weight in the political system, and that a debt was not necessary to the solidity or duration of their power.

But the argument it was said proved too much. If a debt was now essential to the preservation of state authority, it would always be so. It must therefore never be extinguished, but must be perpetuated, in order to secure the existence of the state governments. If, for this purpose, it was indispensable that the expenses of the revolutionary war should be borne by the states, it would not be less indispensable that the expenses of future wars should be borne in the same manner. Either the argument was unfounded, or the constitution was wrong; and the powers of the sword and the purse ought not to have been conferred on the government of the union. Whatever speculative opinions might be entertained on this point, they were to administer the government according to the principles of the constitution as it was framed. But, it was added, if so much power follows the assumption as the objection implies, is it not time to ask--is it safe to forbear assuming? if the power is so dangerous, it will be so when exercised by the states. If assuming tends to consolidation, is the reverse, tending to disunion, a less weighty objection? if it is answered that the non-assumption will not necessarily tend to disunion; neither, it may be replied, does the assumption necessarily tend to consolidation.

It was not admitted that the assumption would tend to perpetuate the debt. It could not be presumed that the general government would be less willing than the local governments to discharge it; nor could it be presumed that the means were less attainable by the former than the latter.

It was not contended that a public debt was a public blessing. Whether a debt was to be preferred to no debt was not the question. The debt was already contracted: and the question, so far as policy might be consulted, was, whether it was more for the public advantage to give it such a form as would render it applicable to the purposes of a circulating medium, or to leave it a mere subject of speculation, incapable of being employed to any useful purpose. The debt was admitted to be an evil; but it was an evil from which, if wisely modified, some benefit might be extracted; and which, in its present state, could have only a mischievous operation.

If the debt should be placed on adequate funds, its operation on public credit could not be pernicious: in its present precarious condition, there was much more to be apprehended in that respect.

To the objection that it would accumulate in large cities, it was answered it would be a monied capital, and would be held by those who chose to place money at interest; but by funding the debt, the present possessors would be enabled to part with it at its nominal value, instead of selling it at its present current rate. If it should centre in the hands of foreigners, the sooner it was appreciated to its proper standard, the greater quantity of specie would its transfer bring into the United States.

To the injustice of charging those states which had made great exertions for the payment of their debts with the burden properly belonging to those which had not made such exertions, it was answered, that every state must be considered as having exerted itself to the utmost of its resources; and that if it could not, or would not make provision for creditors to whom the union was equitably bound, the argument in favour of an assumption was the stronger.

The arguments drawn from local interests were repelled, and retorted, and a great degree of irritation was excited on both sides.

After a very animated discussion of several days, the question was taken, and the resolution was carried by a small majority. Soon after this decision, while the subject was pending before the house, the delegates from North Carolina took their seats, and changed the strength of parties. By a majority of two voices, the resolution was recommitted; and, after a long and ardent debate, was negatived by the same majority.

This proposition continued to be supported with a degree of earnestness which its opponents termed pertinacious, but not a single opinion was changed. It was brought forward in the new and less exceptionable form of assuming specific sums from each state. Under this modification of the principle, the extraordinary contributions of particular states during the war, and their exertions since the peace, might be regarded; and the objections to the measure, drawn from the uncertainty of the sum to be assumed, would be removed. But these alterations produced no change of sentiment; and the bill was sent up to the senate with a provision for those creditors only whose certificates of debt purported to be payable by the union.

In this state of things, the measure is understood to have derived aid from another, which was of a nature strongly to interest particular parts of the union.

From the month of June, 1783, when congress was driven from Philadelphia by the mutiny of a part of the Pennsylvania line, the necessity of selecting some place for a permanent residence, in which the government of the union might exercise sufficient authority to protect itself from violence and insult, had been generally acknowledged. Scarcely any subject had occupied more time, or had more agitated the members of the former congress than this.

[Sidenote: Bill for fixing the permanent seat of government.]

In December, 1784, an ordinance was passed for appointing commissioners to purchase land on the Delaware, in the neighbourhood of its falls, and to erect thereon the necessary public buildings for the reception of congress, and the officers of government; but the southern interest had been sufficiently strong to arrest the execution of this ordinance by preventing an appropriation of funds, which required the assent of nine states. Under the existing government, this subject had received the early attention of congress; and many different situations from the Delaware to the Potomac inclusive, had been earnestly supported; but a majority of both houses had not concurred in favour of any one place. With as little success, attempts had been made to change the temporary residence of congress. Although New York was obviously too far to the east, so many conflicting interests were brought into operation whenever the subject was touched, that no motion designating a more central place, could succeed. At length, a compact respecting the temporary and permanent seat of government was entered into between the friends of Philadelphia, and the Potomac, stipulating that congress should adjourn to and hold its sessions in Philadelphia, for ten years, during which time, buildings for the accommodation of the government should be erected at some place on the Potomac, to which the government should remove at the expiration of the term. This compact having united the representatives of Pennsylvania and Delaware with the friends of the Potomac, in favour both of the temporary and permanent residence which had been agreed on between them, a majority was produced in favour of the two situations, and a bill which was brought into the senate in conformity with this previous arrangement, passed both houses by small majorities. This act was immediately followed by an amendment to the bill then pending before the senate for funding the debt of the union. The amendment was similar in principle to that which had been unsuccessfully proposed in the house of representatives. By its provisions, twenty-one millions five hundred thousand dollars of the state debts were assumed in specified proportions; and it was particularly enacted that no certificate should be received from a state creditor which could be "ascertained to have been issued for any purpose other than compensations and expenditures for services or supplies towards the prosecution of the late war, and the defence of the United States, or of some part thereof, during the same."

When the question was taken in the house of representatives on this amendment, two members representing districts on the Potomac, who, in all the previous stages of the business, had voted against the assumption, declared themselves in its favour; and thus the majority was changed.[45]

[Footnote 45: It has ever been understood that these members were, on principle, in favour of the assumption as modified in the amendment made by the senate; but they withheld their assent from it when originally proposed in the house of representatives, in the opinion that the increase of the national debt, added to the necessity of giving to the departments of the national government a more central residence. It is understood that a greater number would have changed had it been necessary.]

Thus was a measure carried, which was supported and opposed with a degree of zeal and earnestness not often manifested; and which furnished presages, not to be mistaken, that the spirit with which the opposite opinions had been maintained, would not yield, contentedly, to the decision of a bare majority. This measure has constituted one of the great grounds of accusation against the first administration of the general government; and it is fair to acknowledge, that though, in its progress, it derived no aid from the President, whose opinion remained in his own bosom, it received the full approbation of his judgment.

A bill, at length, passed both houses, funding the debt upon principles which lessened considerably the weight of the public burdens, and was entirely satisfactory to the public creditors. The proceeds of the sales of the lands lying in the western territory, and, by a subsequent act of the same session, the surplus product of the revenue after satisfying the appropriations which were charged upon it, with the addition of two millions, which the President was authorized to borrow at five per centum, constituted a sinking fund to be applied to the reduction of the debt.

The effect of this measure was great and rapid. The public paper suddenly rose, and was for a short time above par. The immense wealth which individuals acquired by this unexpected appreciation, could not be viewed with indifference. Those who participated in its advantages, regarded the author of a system to which they were so greatly indebted, with an enthusiasm of attachment to which scarcely any limits were assigned. To many others, this adventitious collection of wealth in particular hands, was a subject rather of chagrin than of pleasure; and the reputation which the success of his plans gave to the secretary of the treasury, was not contemplated with unconcern. As if the debt had been created by the existing government, not by a war which gave liberty and independence to the United States, its being funded was ascribed by many, not to a sense of justice, and to a liberal and enlightened policy, but to the desire of bestowing on the government an artificial strength, by the creation of a monied interest which would be subservient to its will.

The effects produced by giving the debt a permanent value, justified the predictions of those whose anticipations had been most favourable. The sudden increase of monied capital derived from it, invigorated commerce, and gave a new stimulus to agriculture.

About this time, there was a great and visible improvement in the circumstances of the people. Although the funding system was certainly not inoperative in producing this improvement, it can not be justly ascribed to any single cause. Progressive industry had gradually repaired the losses sustained by the war; and the influence of the constitution on habits of thinking and acting, though silent, was considerable. In depriving the states of the power to impair the obligation of contracts, or to make any thing but gold and silver a tender in payment of debts, the conviction was impressed on that portion of society which had looked to the government for relief from embarrassment, that personal exertions alone could free them from difficulties; and an increased degree of industry and economy was the natural consequence of this opinion.

[Sidenote: Adjournment of congress.]

On the 12th of August, after an arduous session, congress adjourned, to meet in Philadelphia the first Monday in the following December.

While the discussions in the national legislature related to subjects, and were conducted in a temper, well calculated to rouse the active spirit of party, the external relations of the United States wore an aspect not perfectly serene. To the hostile temper manifested by the Indians on the western and southern frontiers, an increased degree of importance was given by the apprehension that their discontents were fomented by the intrigues of Britain and of Spain. From Canada, the Indians of the north-west were understood to be furnished with the means of prosecuting a war which they were stimulated to continue; and, to the influence of the governor of the Floridas had been partly attributed the failure of the negotiation with the Creeks. That this influence would still be exerted to prevent a friendly intercourse with that nation was firmly believed; and it was feared that Spain might take a part in the open hostilities threatened by the irritable dispositions of individuals in both countries. From the intimate connexion subsisting between the members of the house of Bourbon, this event was peculiarly deprecated; and the means of avoiding it were sought with solicitude. These considerations determined the President to make another effort at negotiation; but, to preserve the respect of these savages for the United States, it was at the same time resolved that the agent to be employed should visit the country on other pretexts, and should carry a letter of introduction to M'Gillivray, blending with other subjects a strong representation of the miseries which a war with the United States would bring upon his people; and an earnest exhortation to repair with the chiefs of his nation to the seat of the federal government, in order to effect a solid and satisfactory peace. Colonel Willett was selected for this service; and he acquitted himself so well of the duty assigned to him, as to induce the chiefs of the nation, with M'Gillivray at their head, to repair to New York, where negotiations were opened which terminated in a treaty of peace,[46] signed on the 7th day of August.[47]

[Footnote 46: On the first information at St. Augustine that M'Gillivray was about to repair to New York, the intelligence was communicated to the governor at the Havanna, and the secretary of East Florida came to New York, with a large sum of money to purchase flour, as it was said; but to embarrass the negotiations with the Creeks was believed to be his real design. He was closely watched, and measures were taken to render any attempts he might make abortive.]

[Footnote 47: See note, No. IV. at the end of the volume.]

[Sidenote: Treaty with the Creek Indians.]

The pacific overtures made to the Indians of the Wabash and the Miamis not having been equally successful, the western frontiers were still exposed to their destructive incursions. A long course of experience had convinced the President that, on the failure of negotiation, sound policy and true economy, not less than humanity, required the immediate employment of a force which should carry death and destruction into the heart of the hostile settlements. Either not feeling the same impressions, or disposed to indulge the wishes of the western people, who declared openly their preference for desultory military expeditions, congress did not adopt measures corresponding with the wishes of the executive, and the military establishment[48] was not equal to the exigency. The distresses of the frontier establishment, therefore, still continued; and the hostility they had originally manifested to the constitution, sustained no diminution.

[Footnote 48: On giving his assent to the bill "regulating the military establishment of the United States," the President subjoined to the entry in his diary the remark, that although he gave it his sanction, "he did not conceive that the military establishment was adequate to the exigencies of the government, and to the protection it was intended to afford." It consisted of one regiment of infantry, and one battalion of artillery, amounting in the total, exclusive of commissioned officers, to twelve hundred and sixteen men.]

[Sidenote: United States in relations with Great Britain and Spain.]

No progress had been made in adjusting the points of controversy with Spain and Britain. With the former power, the question of boundary remained unsettled; and the cabinet of Madrid discovered no disposition to relax the rigour of its pretensions respecting the navigation of the Mississippi. Its general conduct furnished no foundation for a hope that its dispositions towards the United States were friendly, or that it could view their growing power without jealousy.

The non-execution of the 4th, 5th, 6th, and 7th articles of the treaty of peace, still furnished the United States and Great Britain with matter for reciprocal crimination, which there was the more difficulty in removing, because no diplomatic intercourse was maintained between them. The cabinet of St. James having never appointed a minister to the United States, and Mr. Adams having returned from London without effecting the object of his mission, the American government felt some difficulty in repeating advances which had been treated with neglect. Yet there was much reason to desire full explanations with the English government, and to understand perfectly its views and intentions. The subjects for discussion were delicate in their nature, and could not be permitted to remain in their present state, without hazarding the most serious consequences. The detention of a part of the territory of the United States, was a circumstance of much importance to the honour, as well as to the interests of the nation, and the commercial intercourse between the two countries was so extensive, as to require amicable and permanent regulations. The early attention of the President had been directed to these subjects; and, in October, 1789, he had resolved on taking informal measures to sound the British cabinet, and to ascertain its views respecting them. This negotiation was entrusted to Mr. Gouverneur Morris, who had been carried by private business to Europe; and he conducted it with ability and address, but was unable to bring it to a happy conclusion. The result of his conferences with the Duke of Leeds, and with Mr. Pitt, was a conviction that the British government, considering the posts they occupied on the southern side of the great lakes as essential to their monopoly of the fur trade, would surrender them reluctantly, and was not desirous of entering into a commercial treaty. Those ministers expressed a wish to be on the best terms with America; but repeated the complaints which had been previously made by Lord Carmarthen, of the non-execution of the treaty of peace on the part of the United States. To the observations made by Mr. Morris, that the constitution lately adopted, and the courts established under it, amounted to a full compliance with that treaty on the part of the American government, it was answered, that losses had already been sustained in consequence of the obstructions given by the states to the fair operation of that instrument, which rendered a faithful observance of it, at present, impossible; and, in a note, the Duke of Leeds avowed the intention, if the delay on the part of the American government to fulfil its engagements made in the treaty should have rendered their final completion impracticable, to retard the fulfilment of those which depended entirely on Great Britain, until redress should be granted to the subjects of his majesty on the specific points of the treaty itself, or a fair and just compensation obtained for the non-performance of those stipulations which the United States had failed to observe. Though urged by Mr. Morris to state explicitly in what respects, and to what degree, he considered the final completion of those engagements to which the United States were bound, as having been rendered impracticable, no such statement was given; and the British government seemed inclined to avoid, for the present, those full and satisfactory explanations, which were sought on the part of the United States.

After detailing the motives which in his opinion influenced the English cabinet in wishing to suspend for a time all discussions with America, Mr. Morris observed, "perhaps there never was a moment in which this country felt herself greater; and consequently, it is the most unfavourable moment to obtain advantageous terms from her in any bargain."

Whilst these negotiations were pending, intelligence was received at London of the attack made on the British settlement at Nootka Sound; and preparations were instantly made to resent the insult alleged to have been offered to the nation. The high ground taken on this occasion by the government, and the vigour with which it armed in support of its pretensions, furnished strong reasons for the opinion that a war with Spain, and probably with France, would soon be commenced.

In America, this was considered as a favourable juncture for urging the claims of the United States to the free navigation of the Mississippi. Mr. Carmichael, their charge d'affaires at the court of Madrid, was instructed not only to press this point with earnestness, but to use his utmost endeavours to secure the unmolested use of that river in future, by obtaining a cession of the island of New Orleans, and of the Floridas. A full equivalent for this cession would be found, it was said, in the sincere friendship of the United States, and in the security it would give to the territories of Spain, west of the Mississippi.

Mr. Carmichael was also instructed to point the attention of the Spanish government to the peculiar situation of the United States. To one half of their territory, the use of the Mississippi was indispensable. No efforts could prevent their acquiring it. That they would acquire it, either by acting separately, or in conjunction with Great Britain, was one of those inevitable events against which human wisdom could make no provision. To the serious consideration of the Spanish government, therefore, were submitted the consequences which must result to their whole empire in America, either from hostilities with the United States, or from a seizure of Louisiana by Great Britain.

The opinion, that in the event of war between Great Britain and Spain, Louisiana would be invaded from Canada, was not a mere suggestion for the purpose of aiding the negotiations at Madrid. It was seriously adopted by the American government; and the attention of the executive was turned to the measures which it would be proper to take, should application be made for permission to march a body of troops, through the unsettled territories of the United States, into the dominions of Spain; or should the attempt be made to march them, without permission.

Among the circumstances which contributed to the opinion that, in the event of war, the arms of Great Britain would be directed against the settlements of Spain in America, was the continuance of Lord Dorchester in the government of Canada. This nobleman had intimated a wish to visit New York on his return to England; but the prospect of a rupture with Spain had determined him to remain in Canada. Under the pretext of making his acknowledgments for the readiness with which his desire to pass through New York had been acceded to, his lordship despatched Major Beck with, a member of his family, to sound the American government, and if possible, to ascertain its dispositions towards the two nations. Alluding to the negotiations which had been commenced in London, this gentleman endeavoured to assign a satisfactory cause for the delays which had intervened. It was not improbable, he said, that these delays, and some other circumstances, might have impressed Mr. Morris with an idea of backwardness on the part of the British ministry. His lordship, however, had directed him to say, that an inference of this sort would not, in his opinion, be well founded, as he had reason to believe that the British cabinet was inclined not only towards a friendly intercourse, but towards an alliance with the United States.

Major Beckwith represented the particular ground of quarrel as one which ought to interest all commercial nations in favour of the views of Great Britain; and, from that circumstance, he presumed that, should a war ensue, the United States would find their interest in taking part with Britain, rather than with Spain.

After expressing the concern with which Lord Dorchester had heard of the depredations of the savages on the western frontier of the United States, he declared that his lordship, so far from countenancing these depredations, had taken every proper opportunity to impress upon the Indians a pacific disposition; and that, on his first hearing of the outrages lately committed, he had sent a messenger to endeavour to prevent them. Major Beckwith further intimated, that the perpetrators of the late murders were banditti, composed chiefly of Creeks and Cherokees, in the Spanish interest, over whom the governor of Canada possessed no influence.

These communications were laid before the President, and appeared to him to afford an explanation of the delays experienced by Mr. Morris. He was persuaded that a disposition existed in the cabinet of London to retain things in their actual situation, until the intentions of the American government should be ascertained with respect to the war supposed to be approaching. If the United States would enter into an alliance with Great Britain, and would make a common cause with her against Spain, the way would be smoothed to the attainment of all their objects: but if America should be disinclined to such a connexion, and especially, if she should manifest any partiality towards Spain, no progress would be made in the attempt to adjust the point of difference between the two nations. Taking this view of the subject, he directed that the further communications of Mr. Beckwith should be heard civilly, and that their want of official authenticity should be hinted delicately, without using any expressions which might, in the most remote degree, impair the freedom of the United States, to pursue, without reproach, in the expected war, such a line of conduct as their interests or honour might dictate.

In the opinion that it would not only be useless but dishonourable further to press a commercial treaty, or the exchange of ministers, and that the subject of the western posts ought not again to be moved on the part of the United States, until they should be in a condition to speak a decisive language, the powers given to Mr. Morris were withdrawn. Should the interest of Britain produce a disposition favourable to an amicable arrangement of differences, and to a liberal commercial intercourse secured by compact, it was believed that she would make the requisite advances; until then, or until some other change of circumstances should require a change of conduct, things were to remain in their actual situation.

About the time of adopting this resolution, the dispute between Britain and Spain was adjusted. Finding France unwilling to engage in his quarrel, his Catholic Majesty, too weak to encounter alone the force of the British empire, yielded every point in controversy; and thus were terminated for the present, both the fear of inconveniences, and the hope of advantages which might result to America from hostilities between the two powers, whose dominions were in her neighbourhood, and with each of whom she was already engaged in controversies not easily to be accommodated.

[Sidenote: The president visits Mount Vernon.]

Incessant application to public business, and the consequent change of active for sedentary habits, had greatly impaired the constitution of the President; and, during the last session of congress, he had, for the second time since entering on the duties of his present station, been attacked by a severe disease which reduced him to the brink of the grave. Exercise and a temporary relief from the cares of office being essential to the restoration of his health, he determined, for the short interval afforded by the recess of the legislature, to retire to the tranquil shades of Mount Vernon. After returning from a visit to Rhode Island,[49] which state not having then adopted the American constitution, had not been included in his late tour through New England, he took leave of New York; and hastened to that peaceful retreat, and those rural employments, his taste for which neither military glory, nor political power, could ever diminish.

[Footnote 49: Rhode Island had adopted the constitution in the preceding May, and had thus completed the union.]

After a short indulgence in these favourite scenes, it became necessary to repair to Philadelphia, in order to meet the national legislature.

[Sidenote: The president's speech.]

In the speech delivered to congress at the commencement of their third session, the President expressed much satisfaction at the favourable prospect of public affairs; and particularly noticed the progress of public credit, and the productiveness of the revenue.

Adverting to foreign nations,[50] he said, "the disturbed situation of Europe, and particularly the critical posture of the great maritime powers, whilst it ought to make us more thankful for the general peace and security enjoyed by the United States, reminds us at the same time of the circumspection with which it becomes us to preserve these blessings. It requires also, that we should not overlook the tendency of a war, and even of preparations for war among the nations most concerned in active commerce with this country, to abridge the means, and thereby at least to enhance the price, of transporting its valuable productions to their proper market." To the serious reflection of congress was recommended the prevention of embarrassments from these contingencies, by such encouragement to American navigation as would render the commerce and agriculture of the United States less dependent on foreign bottoms.

[Footnote 50: In a more confidential message to the senate, all the objects of the negotiation in which Mr. Morris had been employed were detailed, and the letters of that gentleman, with the full opinion of the President were communicated.]

After expressing to the house of representatives his confidence arising from the sufficiency of the revenues already established, for the objects to which they were appropriated, he added, "allow me moreover to hope that it will be a favourite policy with you not merely to secure a payment of the interest of the debt funded, but as far, and as fast as the growing resources of the country will permit, to exonerate it of the principal itself." Many subjects relative to the interior government were succinctly and briefly mentioned; and the speech concluded with the following impressive and admonitory sentiment. "In pursuing the various and weighty business of the present session, I indulge the fullest persuasion that your consultations will be marked with wisdom, and animated by the love of country. In whatever belongs to my duty, you shall have all the co-operation which an undiminished zeal for its welfare can inspire. It will be happy for us both, and our best reward, if by a successful administration of our respective trusts, we can make the established government more and more instrumental in promoting the good of our fellow citizens, and more and more the object of their attachment and confidence."

The addresses of the two houses, in answer to the speech, proved that the harmony between the executive and legislative departments, with which the government had gone into operation, had sustained no essential interruption. But in the short debate which took place on the occasion, in the house of representatives, a direct disapprobation of one of the measures of the executive government was, for the first time, openly expressed.

In the treaty lately concluded with the Creeks, an extensive territory claimed by Georgia, under treaties, the validity of which was contested by the Indian chiefs, had been entirely, or in great part, relinquished. This relinquishment excited serious discontents in that state; and was censured by General Jackson with considerable warmth, as an unjustifiable abandonment of the rights and interests of Georgia. No specific motion, however, was made, and the subject was permitted to pass away for the present.

Scarcely were the debates on the address concluded, when several interesting reports were received from the secretary of the treasury, suggesting such further measures as were deemed necessary for the establishment of public credit.

It will be recollected that in his original report on this subject, the secretary had recommended the assumption of the state debts; and had proposed to enable the treasury to meet the increased demand upon it, which this measure would occasion, by an augmentation of the duties on imported wines, spirits, tea, and coffee, and by imposing duties on spirits distilled within the country. The assumption not having been adopted until late in the session, the discussion on the revenue which would be required for this portion of the public debt did not commence, until the house had become impatient for an adjournment. As much contrariety of opinion was disclosed, and the subject did not press,[51] it was deferred to the ensuing session; and an order was made, requiring the secretary of the treasury to prepare and report such further provision as might, in his opinion, be necessary for establishing the public credit. In obedience to this order, several reports had been prepared, the first of which repeated the recommendation of an additional impost on foreign distilled spirits, and of a duty on spirits distilled within the United States. The estimated revenue from these sources was eight hundred and seventy-seven thousand five hundred dollars, affording a small excess over the sum which would be required to pay the interest on the assumed debt. The policy of the measure was discussed in a well digested and able argument, detailing many motives, in addition to those assigned in his original report, for preferring the system now recommended, to accumulated burdens on commerce, or to a direct tax on lands.

[Footnote 51: The interest on the assumed debt was to commence with the year 1792.]

A new tax is the certain rallying point for all those who are unfriendly to the administration, or to the minister by whom it is proposed. But that recommended by the secretary, contained intrinsic causes of objection which would necessarily add to the number of its enemies. All that powerful party in the United States, which attached itself to the local, rather than to the general government, would inevitably contemplate any system of internal revenue with jealous disapprobation. They considered the imposition of a tax by congress on any domestic manufacture, as the intrusion of a foreign power into their particular concerns, which excited serious apprehensions for state importance, and for liberty. In the real or supposed interests of many individuals was also found a distinct motive for hostility to the measure. A large portion of the American population, especially that which had spread itself over the extensive regions of the west, consuming imported articles to a very inconsiderable amount, was not much affected by the impost on foreign merchandize. But the duty on spirits distilled within the United States reached them, and consequently rendered them hostile to the tax.

{1791}

[Sidenote: Debate on the excise law.]

A bill, which was introduced in pursuance of the report, was opposed with great vehemence by a majority of the southern and western members. By some of them it was insisted that no sufficient testimony had yet been exhibited, that the taxes already imposed would not be equal to the exigencies of the public. But, admitting the propriety of additional burdens on the people, it was contended that other sources of revenue, less exceptionable and less odious than this, might be explored. The duty was branded with the hateful epithet of an excise, a species of taxation, it was said, so peculiarly oppressive as to be abhorred even in England; and which was totally incompatible with the spirit of liberty. The facility with which it might be extended to other objects, was urged against its admission into the American system; and declarations made against it by the congress of 1775, were quoted in confirmation of the justice with which inherent vices were ascribed to this mode of collecting taxes. So great was the hostility manifested against it in some of the states, that the revenue officers might be endangered from the fury of the people; and, in all, it would increase a ferment which had been already extensively manifested. Resolutions of Maryland, Virginia, and North Carolina, reprobating the assumption, were referred to as unequivocal evidences of growing dissatisfaction; and the last mentioned state had even expressed its decided hostility to any law of excise. The legislature of North Carolina had rejected with scorn, a proposal for taking an oath to support the constitution of the United States; had refused to admit persons sentenced to imprisonment under the laws of the United States into their jails; and another circumstance was alluded to, but not explained, which was said to exhibit a temper still more hostile to the general government than either of those which had been stated.

When required to produce a system in lieu of that which they so much execrated, the opponents of the bill alternately mentioned an increased duty on imported articles generally, a particular duty on molasses, a direct tax, a tax on salaries, pensions, and lawyers; a duty on newspapers, and a stamp act.

The friends of the bill contended, that the reasons for believing the existing revenue would be insufficient to meet the engagements of the United States, were as satisfactory as the nature of the case would admit, or as ought to be required. The estimates were founded on the best data which were attainable, and the funds already provided, had been calculated by the proper officer to pay the interest on that part of the debt only for which they were pledged. Those estimates were referred to as documents, from which it would be unsafe to depart. They were also in possession of official statements, showing the productiveness of the taxes from the time the revenue bill had been in operation; and arguments were drawn from these, demonstrating the danger to which the infant credit of the United States would be exposed, by relying on the existing funds for the interest on the assumed debt. It was not probable that the proposed duties would yield a sum much exceeding that which would be necessary; but should they fortunately do so, the surplus revenue might be advantageously employed in extinguishing a part of the principal. They were not, they said, of opinion, that a public debt was a public blessing, or that it ought to be perpetuated.

An augmentation of the revenue being indispensable to the solidity of the public credit, a more eligible system than that proposed in the bill, could not, it was believed, be devised. Still further to burden commerce, would be a hazardous experiment which might afford no real supplies to the treasury. Until some lights should be derived from experience, it behoved the legislature to be cautious not to lay such impositions upon trade as might probably introduce a spirit of smuggling, which, with a nominal increase, would occasion a real diminution of revenue. In the opinion of the best judges, the impost on the mass of foreign merchandise could not safely be carried further for the present. The extent of the mercantile capital of the United States would not justify the attempt. Forcible arguments were also drawn from the policy and the justice of multiplying the subjects of taxation, and diversifying them by a union of internal with external objects.

Neither would a direct tax be adviseable. The experience of the world had proved, that a tax on consumption was less oppressive, and more productive, than a tax on either property or income. Without discussing the principles on which the fact was founded, the fact itself was incontestable, that, by insensible means, much larger sums might be drawn from any class of men, than could be extracted from them by open and direct taxes. To the latter system there were still other objections. The difficulty of carrying it into operation, no census having yet been taken, would not be inconsiderable; and the expense of collection through a country thinly settled, would be enormous. Add to this, that public opinion was believed to be more decidedly and unequivocally opposed to it, than to a duty on ardent spirits. North Carolina had expressed her hostility to the one as well as to the other, and several other states were known to disapprove of direct taxes. From the real objections which existed against them, and for other reasons suggested in the report of the secretary, they ought, it was said, to remain untouched, as a resource when some great emergency should require an exertion of all the faculties of the United States.

Against the substitution of a duty on internal negotiations, it was said, that revenue to any considerable extent could be collected from them only by means of a stamp act, which was not less obnoxious to popular resentment than an excise, would be less certainly productive than the proposed duties, and was, in every respect, less eligible.

The honour, the justice, and the faith of the United States were pledged, it was said, to that class of creditors for whose claims the bill under consideration was intended to provide. No means of making the provision had been suggested, which, on examination, would be found equally eligible with a duty on ardent spirits. Much of the public prejudice which appeared in certain parts of the United States against the measure, was to be ascribed to their hostility to the term "excise," a term which had been inaccurately applied to the duty in question. When the law should be carried into operation, it would be found not to possess those odious qualities which had excited resentment against a system of excise. In those states where the collection of a duty on spirits distilled within the country had become familiar to the people, the same prejudices did not exist. On the good sense and virtue of the nation they could confidently rely for acquiescence in a measure which the public exigencies rendered necessary, which tended to equalize the public burdens, and which in its execution would not be oppressive.

A motion made by Mr. Jackson, to strike out that section which imposed a duty on domestic distilled spirits, was negatived by thirty-six to sixteen; and the bill was carried by thirty-five to twenty-one.

Some days after the passage of this bill, another question was brought forward, which was understood to involve principles of deep interest to the government.

[Sidenote: On a national bank.]

The secretary of the treasury had been the uniform advocate of a national bank. Believing that such an institution would be "of primary importance to the prosperous administration of the finances; and of the greatest utility in the operations connected with the support of public credit," he had earnestly recommended its adoption in the first general system which he presented to the view of congress; and, at the present session, had repeated that recommendation in a special report, containing a copious and perspicuous argument on the policy of the measure. A bill conforming to the plan he suggested was sent down from the senate, and was permitted to proceed, unmolested, in the house of representatives, to the third reading. On the final question, a great, and, it would seem, an unexpected opposition was made to its passage. Mr. Madison, Mr. Giles, Mr. Jackson, and Mr. Stone spoke against it. The general utility of banking systems was not admitted, and the particular bill before the house was censured on its merits; but the great strength of the argument was directed against the constitutional authority of congress to pass an act for incorporating a national bank.

The government of the United States, it was said, was limited; and the powers which it might legitimately exercise were enumerated in the constitution itself. In this enumeration, the power now contended for was not to be found. Not being expressly given, it must be implied from those which were given, or it could not be vested in the government. The clauses under which it could be claimed were then reviewed and critically examined; and it was contended that, on fair construction, no one of these could be understood to imply so important a power as that of creating a corporation.

The clause which enables congress to pass all laws necessary and proper to execute the specified powers, must, according to the natural and obvious force of the terms and the context, be limited to means _necessary_ to the _end_ and _incident_ to the _nature_ of the specified powers. The clause, it was said, was in fact merely declaratory of what would have resulted by unavoidable implication, as the appropriate, and as it were technical means of executing those powers. Some gentlemen observed, that "the true exposition of a necessary mean to produce a given end was that mean without which the end could not be produced."

The bill was supported by Mr. Ames, Mr. Sedgwick, Mr. Smith, of South Carolina, Mr. Lawrence, Mr. Boudinot, Mr. Gerry, and Mr. Vining.

The utility of banking institutions was said to be demonstrated by their effects. In all commercial countries they had been resorted to as an instrument of great efficacy in mercantile transactions; and even in the United States, their public and private advantages had been felt and acknowledged.

Respecting the policy of the measure, no well founded doubt could be entertained; but the objections to the constitutional authority of congress deserved to be seriously considered.

That the government was limited by the terms of its creation was not controverted; and that it could exercise only those powers which were conferred on it by the constitution, was admitted. If, on examination, that instrument should be found to forbid the passage of the bill, it must be rejected, though it would be with deep regret that its friends would suffer such an opportunity of serving their country to escape for the want of a constitutional power to improve it.

In asserting the authority of the legislature to pass the bill, gentlemen contended, that incidental as well as express powers must necessarily belong to every government: and that, when a power is delegated to effect particular objects, all the known and usual means of effecting them, must pass as incidental to it. To remove all doubt on this subject, the constitution of the United States had recognized the principle, by enabling congress to make all laws which may be necessary and proper for carrying into execution the powers vested in the government. They maintained the sound construction of this grant to be a recognition of an authority in the national legislature, to employ all the known and usual means for executing the powers vested in the government. They then took a comprehensive view of those powers, and contended that a bank was a known and usual instrument by which several of them were exercised.

After a debate of great length, which was supported on both sides with ability, and with that ardour which was naturally excited by the importance attached by each party to the principle in contest, the question was put, and the bill was carried in the affirmative by a majority of nineteen voices.

[Sidenote: The opinions of the cabinet on the constitutionality of this last law.]

The point which had been agitated with so much zeal in the house of representatives, was examined with equal deliberation by the executive. The cabinet was divided upon it. The secretary of state, and the attorney general, conceived that congress had clearly transcended their constitutional powers; while the secretary of the treasury, with equal clearness, maintained the opposite opinion. The advice of each minister, with his reasoning in support of it, was required in writing, and their arguments were considered by the President with all that attention which the magnitude of the question, and the interest taken in it by the opposing parties, so eminently required. This deliberate investigation of the subject terminated in a conviction, that the constitution of the United States authorized the measure;[52] and the sanction of the executive was given to the act.

[Footnote 52: See note, No. V. at the end of the volume.]

[Sidenote: Progress of parties.]

The judgment is so much influenced by the wishes, the affections, and the general theories of those by whom any political proposition is decided, that a contrariety of opinion on this great constitutional question ought to excite no surprise. It must be recollected that the conflict between the powers of the general and state governments was coeval with those governments. Even during the war, the preponderance of the states was obvious; and, in a very few years after peace, the struggle ended in the utter abasement of the general government. Many causes concurred to produce a constitution which was deemed more competent to the preservation of the union, but its adoption was opposed by great numbers; and in some of the large states especially, its enemies soon felt and manifested their superiority. The old line of division was still as strongly marked as ever. Many retained the opinion that liberty could be endangered only by encroachments upon the states; and that it was the great duty of patriotism to restrain the powers of the general government within the narrowest possible limits.

In the other party, which was also respectable for its numbers, many were found who had watched the progress of American affairs, and who sincerely believed that the real danger which threatened the republic was to be looked for in the undue ascendency of the states. To them it appeared, that the substantial powers, and the extensive means of influence, which were retained by the local sovereignties, furnished them with weapons for aggression which were not easily to be resisted, and that it behoved all those who were anxious for the happiness of their country, to guard the equilibrium established in the constitution, by preserving unimpaired, all the legitimate powers of the union. These were more confirmed in their sentiments, by observing the temper already discovered in the legislatures of several states, respecting the proceedings of congress.

To this great and radical division of opinion, which would necessarily affect every question on the authority of the national legislature, other motives were added, which were believed to possess considerable influence on all measures connected with the finances.

As an inevitable effect of the state of society, the public debt had greatly accumulated in the middle and northern states, whose inhabitants had derived, from its rapid appreciation, a proportional augmentation of their wealth. This circumstance could not fail to contribute to the complacency with which the plans of the secretary were viewed by those who had felt their benefit, nor to the irritation with which they were contemplated by others who had parted with their claims on the nation. It is not impossible, that personal considerations also mingled themselves with those which were merely political.

With so many causes to bias the judgment, it would not have been wonderful if arguments less plausible than those advanced by either party had been deemed conclusive on its adversary; nor was it a matter of surprise that each should have denied to those which were urged in opposition, the weight to which they were certainly entitled. The liberal mind which can review them without prejudice, will charge neither the supporters nor the opponents of the bill with insincerity, nor with being knowingly actuated by motives which might not have been avowed.

This measure made a deep impression on many members of the legislature; and contributed, not inconsiderably, to the complete organization of those distinct and visible parties, which, in their long and dubious conflict for power, have since shaken the United States to their centre.

Among the last acts of the present congress, was an act to augment the military establishment of the United States.

[Sidenote: War with the Indians.]

The earnest endeavours of the President to give security to the north-western frontiers, by pacific arrangements, having been entirely unavailing, it became his duty to employ such other means as were placed in his hands, for the protection of the country. Confirmed by all his experience in the opinion that vigorous offensive operations alone could bring an Indian war to a happy conclusion, he had planned an expedition against the hostile tribes north-west of the Ohio, as soon as the impracticability of effecting a treaty with them had been ascertained.

General Harmar, a veteran of the revolution, who had received his appointment under the former government, was placed at the head of the federal troops. On the 30th of September, he marched from fort Washington with three hundred and twenty regulars. The whole army when joined by the militia of Pennsylvania and Kentucky amounted to fourteen hundred and fifty-three men. About the middle of October, Colonel Harden, who commanded the Kentucky militia, and who had been also a continental officer of considerable merit, was detached at the head of six hundred men, chiefly militia, to reconnoitre the ground, and to ascertain the intentions of the enemy. On his approach, the Indians set fire to their principal village, and fled with precipitation to the woods. As the object of the expedition would be only half accomplished, unless the savages could be brought to action and defeated, Colonel Harden was again detached at the head of two hundred and ten men, thirty of whom were regulars. About ten miles west of Chilicothe, where the main body of the army lay, he was attacked by a party of Indians. The Pennsylvanians, who composed his left column, had previously fallen in the rear; and the Kentuckians, disregarding the exertions of their colonel, and of a few other officers, fled on the first appearance of an enemy. The small corps of regulars commanded by Lieutenant Armstrong made a brave resistance. After twenty-three of them had fallen in the field, the surviving seven made their escape and rejoined the army.

[Sidenote: Defeat of Harmar.]

Notwithstanding this check, the remaining towns on the Scioto were reduced to ashes, and the provisions laid up for the winter were entirely destroyed. This service being accomplished, the army commenced its march towards fort Washington. Being desirous of wiping off the disgrace which his arms had sustained, General Harmar halted about eight miles from Chilicothe, and once more detached Colonel Harden with orders to find the enemy and bring on an engagement. His command consisted of three hundred and sixty men, of whom sixty were regulars commanded by Major Wyllys. Early the next morning, this detachment reached the confluence of the St. Joseph and St. Mary, where it was divided into three columns. The left division, commanded by Colonel Harden in person, crossed the St. Joseph, and proceeded up its western bank. The centre, consisting of the federal troops, was led by Major Wyllys up the eastern side of that river; and the right, under the command of Major M'Millan, marched along a range of heights which commanded the right flank of the centre division. The columns had proceeded but a short distance, when each was met by a considerable body of Indians, and a severe engagement ensued. The militia retrieved their reputation, and several of their bravest officers fell. The heights on the right having been, from some cause not mentioned, unoccupied by the American troops, the savages seized them early in the action, and attacked the right flank of the centre with great fury. Although Major Wyllys was among the first who fell, the battle was maintained by the regulars with spirit, and considerable execution was done on both sides. At length, the scanty remnant of this small band, quite overpowered by numbers, was driven off the ground, leaving fifty of their comrades, exclusive of Major Wyllys and Lieutenant Farthingham, dead upon the field. The loss sustained by the militia was also considerable. It amounted to upwards of one hundred men, among whom were nine officers. After an engagement of extreme severity, the detachment joined the main army, which continued its march to fort Washington.

General Harmar, with what propriety it is not easy to discern, claimed the victory. He conceived, not entirely without reason, that the loss of a considerable number of men, would be fatal to the Indians, although a still greater loss should be sustained by the Americans, because the savages did not possess a population from which they could replace the warriors who had fallen. The event, however, did not justify this opinion.

The information respecting this expedition was quickly followed by intelligence stating the deplorable condition of the frontiers. An address from the representatives of all the counties of Kentucky, and those of Virginia bordering on the Ohio, was presented to the President, praying that the defence of the country might be committed to militia unmixed with regulars, and that they might immediately be drawn out to oppose "the exulting foe." To this address, the President gave a conciliatory answer, but he understood too well the nature of the service, to yield to the request it contained. Such were his communications to the legislature, that a regiment was added to the permanent military establishment, and he was authorized to raise a body of two thousand men, for six months, and to appoint a major general, and a brigadier general, to continue in command so long as he should think their services necessary.

[Sidenote: Adjournment of congress.]

With the 3d of March, 1791, terminated the first congress elected under the constitution of the United States. The party denominated federal having prevailed at the elections, a majority of the members were steadfast friends of the constitution, and were sincerely desirous of supporting a system they had themselves introduced, and on the preservation of which, in full health and vigour, they firmly believed the happiness of their fellow citizens, and the respectability of the nation, greatly to depend. To organize a government, to retrieve the national character, to establish a system of revenue, and to create public credit, were among the arduous duties which were imposed upon them by the political situation of their country. With persevering labour, guided by no inconsiderable portion of virtue and intelligence, these objects were, in a great degree, accomplished. Out of the measures proposed for their attainment, questions alike intricate and interesting unavoidably arose. It is not in the nature of man to discuss such questions without strongly agitating the passions, and exciting irritations which do not readily subside. Had it even been the happy and singular lot of America to see its national legislature assemble uninfluenced by those prejudices which grew out of the previous divisions of the country, the many delicate points which they were under the necessity of deciding, could not have failed to disturb this enviable state of harmony, and to mingle some share of party spirit with their deliberations. But when the actual state of the public mind was contemplated, and due weight was given to the important consideration that, at no very distant day, a successor to the present chief magistrate must be elected, it was still less to be hoped that the first congress could pass away, without producing strong and permanent dispositions in parties, to impute to each other designs unfriendly to the public happiness. As yet, however, these imputations did not extend to the President. His character was held sacred, and the purity of his motives was admitted by all. Some divisions were understood to have found their way into the cabinet. It was insinuated that between the secretaries of state and of the treasury, very serious differences had arisen; but these high personages were believed, to be equally attached to the President, who was not suspected of undue partiality to either. If his assent to the bill for incorporating the national bank produced discontent, the opponents of that measure seemed disposed to ascribe his conduct, in that instance, to his judgment, rather than to any prepossession in favour of the party by whom it was carried. The opposition, therefore, in congress, to the measures of the government, seemed to be levelled at the secretary of the treasury, and at the northern members by whom those measures were generally supported, not at the President by whom they were approved. By taking this direction, it made its way into the public mind, without being encountered by that devoted affection which a great majority of the people felt for the chief magistrate of the union. In the mean time, the national prosperity was in a state of rapid progress; and the government was gaining, though slowly, in the public opinion. But in several of the state assemblies, especially in the southern division of the continent, serious evidences of dissatisfaction were exhibited, which demonstrated the jealousy with which the local sovereignties contemplated the powers exercised by the federal legislature.