Title: Discrimination between Present and Original Holders of the Public Debt, [11 February] 1790
From: Madison, James
To:

[11 February 1790]

   On 8 February the Committee of the Whole took up Secretary Hamilton’s report on public credit. FitzSimons submitted eight resolutions which served as a framework for the debate. The first declared “that adequate provision ought to be made for fulfilling the engagements of the United States, in respect to their foreign debt.” This passed unanimously. The second resolution called for “the payment of interest on, and the gradual discharge of the domestic debt of the United States.” Scott moved to add the words “as soon as the same is ascertained and duly liquidated.” This motion provoked a lengthy debate during which a question arose over discrimination between the original and present holders of the public debt. After Scott’s amendment was defeated “by a great majority” (Gazette of the U.S., 13 Feb. 1790), Burke then moved to add: “provided a discrimination be made between the original holders and their assignees, and that a scale of depreciation be prepared accordingly.” Declaring that he had made this proposition only as a favor to a colleague, and did not mean to support it, Burke withdrew his motion moments before JM rose to speak.

Mr. Madison. No gentleman, Mr. Chairman, has expressed more strongly, than I feel, the importance and difficulty of the subject before us. Although I have endeavored to view it under all its aspects, and analize it in all its principles; yet have I kept my mind open, and been anxious to aid my own reflections, by the reflected light to be expected from gentlemen on this floor who enter into the discussion. For this purpose, I chused hitherto, rather to be a hearer than a speaker on the subject, and should even at this moment have continued in my seat, but that the turn which the business has taken, renders it requisite for me now, if at all, to trouble the committee with my reflections, and the opinion in which they have terminated.
It has been said, by some gentlemen, that the debt itself does not exist in the extent, and form which is generally supposed. I confess, sir, I differ altogether from the gentleman who takes that ground. Let us consider, first, by whom the debt was contracted, and then let us consider, sir, to whom it is due. The debt was contracted by the United States, who, with respect to that particular transaction, were in a national capacity. The government was nothing more than the agent, or organ, by which the whole body of the people acted: The change in the government which has taken place, has enlarged its national capacity, but it has not varied the national obligation, with respect to the engagements entered into by that transaction: For, in like manner, the present government is nothing more than the organ, or agent, of the public. The obligation which they are under, is precisely the same with that under which the debt was contracted; although the government has been changed, the nation remains the same. There is no change in our political duty, nor in the moral or political obligation. The language I now use, sir, is the language of the constitution itself; it declares, that all debts shall have the same validity against the United States, under the new, as under their old form of government. The obligation remains the same, though I hope experience will prove that the ability has been favorably varied.
The next question is, to what amount the public are at present engaged? I conceive the question may be answered in a few words. The United States owe the value they received, which they acknowledge, and which they have promised to pay: What is that value? It is a certain sum in principal, bearing an interest of six per cent. No logic, no magic, in my opinion, can diminish the force of the obligation.
The only point on which we can deliberate is, to whom the payment is really due; for this purpose, it will be proper to take notice of the several descriptions of people who are creditors of the union, and lay down some principles respecting them, which may lead us to a just and equitable decision. As there is a small part of the debt yet unliquidated, it may be well to pass it by, and come to the great mass of the liquidated debt. It may here be proper to notice four classes into which they may be divided.
First. Original creditors, who have never alienated their securities.
Second. Original creditors, who have alienated.
Third. Present holders of alienated securities.
Fourth. Intermediate holders, through whose hands securities have circulated.
The only principles that can govern the decision on their respective pretensions, I take to be, 1. Public justice; 2. public faith; 3. public credit; 4. public opinion.
With respect to the first class, there can be no difficulty. Justice is in their favor, for they have advanced the value which they claim; public faith is in their favor, for the written promise is in their hands; respect for public credit is in their favor, for if claims so sacred are violated, all confidence must be at an end; public opinion is in their favor, for every honest citizen cannot but be their advocate.
With respect to the last class, the intermediate holders, their pretensions, if they have any, will lead us into a labyrinth, for which it is impossible to find a clue. This will be the less complained of, because this class were perfectly free, both in becoming, and ceasing to be creditors; and because, in general, they must have gained by their speculations.
The only rival pretensions, then, are those of the original creditors, who have assigned, and of the present holders of the assignments.
The former may appeal to justice, because the value of the money, the service, or the property advanced by them, has never been really paid to them.
They may appeal to good faith, because the value stipulated and expected is not satisfied by the steps taken by the government. The certificates put into the hands of the creditors, on closing their settlements with the public, were of less real value than was acknowledged to be due; they may be considered as having been forced, in fact, on the receivers. They cannot, therefore, be fairly adjudged an extinguishment of the debt. They may appeal to the motives for establishing public credit, for which justice and faith form the natural foundation. They may appeal to the precedent furnished by the compensation allowed to the army during the late war, for the depreciation of bills, which nominally discharged the debts. They may appeal to humanity, for the sufferings of the military part of the creditors can never be forgotten, while sympathy is an American virtue. To say nothing of the singular hardship, in so many mouths, of requiring those who have lost four-fifths or seven-eighths of their due, to contribute the remainder in favor of those who have gained in the contrary proportion.
On the other hand, the holders by assignment, have claims, which I by no means wish to depreciate. They will say, that whatever pretensions others may have against the public, these cannot affect the validity of theirs: That if they gain by the risk taken upon themselves, it is but the just reward of that risk: That as they hold the public promise, they have an undeniable demand on the public faith: That the best foundation of public credit, is that adherence to literal engagements on which it has been erected by the most flourishing nations: That if the new government should swerve from so essential a principle, it will be regarded by all the world as inheriting the infirmities of the old. Such being the interfering claims on the public, one of three things must be done; either pay both, reject wholly one or the other, or make a composition between them on some principle of equity. To pay both, is perhaps beyond the public faculties; and as it would far exceed the value received by the public, it will not be expected by the world, nor even by the creditors themselves; to reject wholly the claims of either, is equally inadmissible; such a sacrifice of those who possess the written engagements, would be fatal to the proposed establishment of public credit; it would moreover punish those who had put their trust in the public promises and resources. To make the other class the sole victims was an idea at which human nature recoiled.
A composition, then, is the only expedient that remains; let it be a liberal one, in favor of the present holders; let them have the highest price which has prevailed in the market; and let the residue belong to the original sufferers. This will not do perfect justice; but it will do more real justice, and perform more of the public faith, than any other expedient proposed. The present holders, where they have purchased at the lowest price of the securities, will have a profit that cannot reasonably be complained of; where they have purchased at a higher price, the profit will be considerable; and even the few who have purchased at the highest price cannot well be losers, with a well funded interest of 6 per cent. The original sufferers will not be fully idemnified; but they will receive, from their country, a tribute due to their merits, which, if it does not entirely heal their wounds, will assuage the pain of them. I am aware, that many plausible objections will lie against what I have suggested, some of which, I foresee, will be taken some notice of. It will be said, that the plan is impracticable; should this be demonstrated, I am ready to renounce it; but it does not appear to me in that light. I acknowledge that such a scale, as has often been a subject of conversation, is impracticable.
The discrimination proposed by me, requires nothing more than a knowledge of the present holders, which will be shown by the certificates; and of the original holders, which the office documents will shew. It may be objected, that if the government is to go beyond the literal, into the equitable claims against the United States, it ought to go back to every case where injustice has been done. To this the answer is obvious: The case in question, is not only different from others in point of magnitude and of practicability, but forces itself on the attention of the committee, as necessarily involved in the business before them. It may be objected, that public credit will suffer, especially abroad: I think this danger will be effectually obviated by the honesty and disinterestedness of the government displayed in the measure, by a continuance of the punctual discharge of foreign interest, by the full provision to be made for the whole foreign debt, and the equal punctuality I hope to see in the future payments on the domestic debts. I trust also, that all future loans will be founded on a previous establishment of adequate funds; and that a situation, like the present, will be thereby rendered impossible.
I cannot but regard the present case as so extraordinary, in many respects, that the ordinary maxims are not strictly applicable to it. The fluctuations of stock in Europe, so often referred to, have no comparison with those in the United States. The former never exceeded 50, 60, or 70 per cent: Can it be said, that because a government thought this evil insufficient to justify an interference, it would view in the same light a fluctuation amounting to seven or 800 per cent?
I am of opinion, that were Great-Britain, Holland, or any other country, to fund its debts precisely in the same situation as the American debt, some equitable interference of the government would take place. The South-Sea scheme, in which a change, amounting to 1000 per cent. happened in the value of stock, is well known to have produced an interference, and without any injury whatever to the subsequent credit of the nation. It is true, that, in many respects, the case differed from that of the United States; but, in other respects, there is a degree of similitude, which warrants the conjecture. It may be objected, that such a provision as I propose, will exceed the public ability: I do not think the public unable to discharge honorably all its engagements, or that it will be unwilling, if the appropriations shall be satisfactory. I regret, as much as any member, the unavoidable weight and duration of the burdens to be imposed; having never been a proselyte to the doctrine, that public debts are public benefits. I consider them, on the contrary, as evils which ought to be removed as fast as honor and justice will permit, and shall heartily join in the means necessary for that purpose. I conclude with declaring, as my opinion, that if any case were to happen among individuals, bearing an analogy to that of the public, a court of equity would interpose its redress; or that if a tribunal existed on earth, by which nations could be compelled to do right, the United States would be compelled to do something not dissimilar in its principles to what I have contended for.


Title: Slave Trade Petitions, [12 February] 1790
From: Madison, James
To:

[12 February 1790]

   A memorial from the Pennsylvania Abolition Society, signed by Benjamin Franklin and calling upon Congress to give its “serious attention to the subject of slavery” and to “step to the very verge” of its powers to discourage the slave trade, was read. Debate resumed on a motion to commit the Quaker petition that had been presented the previous day and read a second time on this day. Representatives from South Carolina and Georgia denounced the petition as containing an unconstitutional request.

Mr. Madison. The debate has taken a serious turn, and it will be owing to this alone if an alarm is created; for had the memorial been treated in the usual way, it would have been considered as a matter of course, and a report might have been made, so as to have given general satisfaction.
If there was the slightest tendency by the commitment to break in upon the constitution, he would object to it; but he did not see upon what ground such an event was to be apprehended. The petition prayed, in general terms, for the interference of congress, so far as they were constitutionally authorised; but even if its prayer was, in some degree, unconstitutional, it might be committed, as was the case on Mr. Churchman’s petition, one part of which was supposed to apply for an unconstitutional interference by the general government.
He admitted, that congress were restricted by the constitution from taking measures to abolish the slave-trade; yet there were a variety of ways by which they could countenance the abolition, and they might make some regulations, respecting the introduction of them into the new states, to be formed out of the Western Territory, different from what they could in the old settled states. He thought the object well worthy of consideration.


Title: To James Madison from James Maury, 13 February 1790
From: Maury, James
To: Madison, James

Dr Sir,
Liverpool 13 Fby 1790
Since my Respects of 6 October, I have your favor of 21 June by Mr James, who did not come here, but sent it from London. I should have been happy to have attended to him had he passed this way.
It is not in my power by this opportunity to hand you Sales of your Tobaccoes by the Venus and Cyrus—this last named Consignment is under considerable Inconvenience & disadvantage for having been shipped too new—one of those by the Venus is sold & it is fortunate, perhaps, for you that the other two are on Hand, for the Demand for Tobo is reviving with an advance in price.
This goes by the Venus in my Employ to Rappahannock & should it be convenient I shall be much obliged by your assistance to her Loading. I have the Honor to be with much Respect & Regard dr Sir your most obt.
James Maury


Title: From James Madison to Thomas Jefferson, 14 February 1790
From: Madison, James
To: Jefferson, Thomas

Dear Sir,
New York, Feby 14, 1790.
We proceed slowly in business. The Report of Mr. Hamilton has been, of late, the principal subject of debate. On the foreign debt the vote has been unanimous. On the domestic, a reduction of the transferred principal has been brought into view by several arguments and propositions. My idea is that there should be no interference of the public in favour of the public either as to principal or interest, but that the highest market price only should be allowed to the purchasers, and the balance be applied to solace the original sufferers, whose claims were not in conscience extinguished by a forced payment in depreciated certificates. The equity of this proposition is not contested. Its impracticability will be urged as an insuperable objection. I am aware of the difficulties of the plan, but believe they might be removed by one-half the exertion that will be used to collect and colour them.
A Bill for taking a census has passed the House of Representatives, and is with the Senate. It contained a schedule for ascertaining the component classes of the Society, a kind of information extremely requisite to the Legislator, and much wanted for the science of Political Economy. A repetition of it every ten years would hereafter afford a most curious and instructive assemblage of facts. It was thrown out by the Senate as a waste of trouble and supplying materials for idle people to make a book. Judge by this little experiment of the reception likely to be given to so great an idea as that explained in your letter of September.


Title: To James Madison from Thomas Jefferson, 14 February 1790
From: Jefferson, Thomas
To: Madison, James

Dear Sir
Monticello Feb. 14. 1790.
I received your favor of Jan. 24. the day before yesterday; the President’s of the 21st. was 16 days getting to my hands. I write him by this occasion my acceptance, and shall endeavor to subdue the reluctance I have to that office which has increased so as to oppress me extremely.

The President pressed my coming on immediately, and I have only said to him in general that circumstances, uncontroulable by me, will not let me set out till the last of next week, say the last day of the month. I meant to ask you to explain to him the particular reason. My daughter is to be married on the 25th. to the mr. Randolph whom you saw here. His father will come only a day or two before that to arrange the provision we mean to make for the young couple, & that this may be perfectly valid it’s execution must take place before the marriage. Thus you see that the happiness of a child, for life, would be hazarded were I to go away before this arrangement is made.
We were greatly alarmed by the report of the attack on your health at Georgetown. The return of your brother from that place first quieted our apprehensions. I hope this will find you perfectly reestablished. All is quiet here. Our countrymen are thrown into a wheat-fever by the price of wheat now 10/3 the bushel. We are offered a dollar at our barns here for the growing crop. Where in N. York will you advise me to go in the first instance on my arrival? Be so good as to think & even provide for me if you can a temporary and decent birth, & lodge a line at mrs. House’s in Philadelphia where I shall be about the 13th. and at New York the 15th. of March. I shall see you so soon that I need only add here assurances always true of the sincere esteem & respect of Dear Sir your affectionate friend & sert.
Th: Jefferson


Title: From James Madison to Edward Carrington, 14 February 1790
From: Madison, James
To: Carrington, Edward

Letter not found. 14 February 1790. Acknowledged in Carrington to JM, 2 Mar. 1790. Explains his motion in Congress to discriminate between the original and present holders of public securities.


Title: To James Madison from “Foreigner,” 17 February 1790
From: “Foreigner”
To: Madison, James

Sir
Feby. 17. 90
I take the liberty to ask your attention to that part of the domestic debt which is registered in the name of foreigners. There are circumstances attending this portion of the debt which, in addition to the usual obligations of justice, give peculiar force & solemnity to the demands of present holders of the Certificates.
It should be observed that the first transfers of the domestic debt to foreigners, ware received by them at par, in the payment of private debts. The mode in which this business was Conducted deserves particular consideration.
Certain Agents offered to contract with Hollanders to furnish a large amount of the domestic debt of the United States. The precaution which the people of Holland are apt to observe with respect to money matters, was never exemplified in a stronger light than in the methods they took to ascertain the validity of the debt. They wished to establish it beyond a possibility of mistake, that the debt was subject to no new liquidation, that it was actually payable in specie, and that the assignees stood on a footing not less eligeble than the original claimant.
For these purposes, the agents obtained copies of all the acts of congress relative to the subject authenticated by the secretary of Congress. Among these, the address published in the year 1783 said to have been composed by yourself had a very important affect.
A certificate likewise was obtained from Mr. Gorham the President of Congress explaining the principles on which the debt rested.
The secretary of the Board of Treasury under the seal of his office gave attestation to confirm the facts of which the Hollanders wished to be convinced.
Several of the most distinguished characters who were then members of Congress gave certificates to satisfy the minds of foreigners of the obligatory nature of the debt upon the United States.
Many eminent law characters in this Country, among whom was Doctor Johnson, have certified in the most unequivocal manner that the registered debt of the United States, in whatever hands it may be found, must be considered as a bona fide demand against the government.
That the sum expressed on the face of the certificates could not be reduced, or dischar[g]ed any other way than by actual payment, to the legal possessors.
The Ministers & Consuls of foreign Nations who then resided in this Country gave ample testimony with respect to the characters, before mentioned that full faith might be given to the documents which they furnished.
To place the validity of the debt in a still stronger point of light, Mr. Jefferson the American Minister in Paris corroborated all the facts expressed in the certificates I have enumerated. From this representation, you will perceive that the Hollanders reasonably supposes they were acting on safe ground in purchasing our domestic debt.
The Dutch are large holders of our registered certificates. They purchased at an average of fifteen shilling on the pound. The mode in which the debt is negotiated in Holland, is a circumstance that deserves notice. The Bankers at Amsterdam receive a large amount of certificates in trust, and put into circulation a new paper called actions. These are for small sums and are dispersed among the manufactors & farmers who purchase them & retain them on hand to receive their dividend of Interest or principle that may be paid on the certificates lodged as above mentioned. By this means there are perhaps several Thousand persons who hold actions, predicated on the domestic debt. These creditors are principally the same persons to whom we are indebted for foreign Loans. They were taught to believe, from what they supposed unquestionable authority, that the domestic debt of the united state was equelly binding upon the government as the foreign and that Congress had Sanctioned the practice of transfers by frequent & Solemn declarations. The people in Holland who have money at loan, depend on the annual interest for a subsistance. If they are deprived of this source of support they must be beyond comparison miserable. In an old Country, a man deprived of his usual means of maintainance cannot easely find a substitute.
If your amendment should prevail in what light will American faith be viewed in Europe. In what light must you be viewed by foreigners when they compare your address of 1783 with the principles you advanc’d in support of your amendment?
The real injury that has happened by depreciation is not so Considerable as you imagine. There was not one million of Dollars in circulation in any stage of the depreciation.
The original holders taken together have sold for 12/6 on the pound. It can be demonstrated that the Certificates were aleniated on pretty favourable terms. The loss sustained by depreciation has happened principally to the original purchasers & not to the original claimant. Most of the soldiers of the main army transfered their claims before it was conjectured they would be liquidated into certificates. In fact they sold this part of their claims on the same terms, as those that were afterwards paid in actual specie. The army anticipated their pay in general six months before it was due. I do not imagine that more than one Millions of Dolls. of the Certificates have even been alieniated by original holders on such unfavorable terms, as to make their case a hard one. I am sir with Respect
Foreigner


Title: To James Madison from John Nicholson, 17 February 1790
From: Nicholson, John
To: Madison, James

Sir
Philada. February 17h 1790.
I have taken the liberty of inclosing you copies of a number of letters I have written to a friend in Congress published at his request relating to the important subject of finance now before that honorable body.
The practicability of effecting a separate provision for original holders, I am well convinced of. I have carried into effect a similar plan in Penna. adopted by the Legislature with respect to their depreciation debt And with a few alterations it might be done with great exactness and very little difficulty.
Pardon the freedom I have taken and permit me to subscribe myself, with high respect sir your Most Obedt humble servant
Jno. Nicholson


Title: To James Madison from Benjamin Rush, 18 February 1790
From: Rush, Benjamin
To: Madison, James

Dear Sir,
Philadelphia Feby 18. 1790.
I expected that the establishment of the federal Goverment, and the reformation of the Constitution of Pennsylvania would have gratified all my wishes for the prosperity of my Country, and have left me to enjoy in private life the pleasures of science and professional pursuits. But I find I cannot be an indifferent Spectator of the great Question which now agitates your house. It involves in it the honor and Safety of the United States. The part you have taken in it accords so perfectly with Opinions that I have entertained After mature investigation for four years upon that Subject, that I should do my feelings great violence if I did not do homage to the integrity, and independance you have lately discovered in your proposition to do strict justice in funding the debts of the United States.
The enemies of your motion concur in its being agreeable to just feelings, but they say that reason alone should decide upon all great Questions of National policy. This is a new doctrine in Morals & Metaphysicks. In matters of right & wrong feeling alone should be our Guide. What would be the state of morals in our World if mankind were to be led only by the slow, and feeble Operations of reason? To renounce feeling upon the present Question, is to desert the standard of heaven implanted in the human breast. Nineteen out of twenty of the citizens of Pennsylvania will in a short time follow you in your motion. It is true they cannot all reason upon it—but their feelings in favor of justice are in some instances excruciating. Never have I heard more rage expressed against the Oppressors of our Country during the late War, than I daily hear against the men who by the Secretary’s report are to reap all the benefits of the revolution, at the expence of the greatest part of the Virtue & property that purchased it.
I am not more satisfied that theft & murder are contrary to the divine commands, & to the Order of Society, than that the report of the Secretary involves in it a breach of the fundamental principles of justice.
If the interest upon our National Debt were to be paid to the purchasers of Certificates out of the mines of Brazil or Peru, without a single tax extorted from our citizens for that purpose, I think I could prove that the measure would ruin our country.
I could fill a Volume with facts & Anecdotes of the Characters of those Men who now hold the greatest part of the Alienated Certificates of this state. Many of them are not worthy of the priviledges of Citizenship in the United States.
The principal design of this letter is to suggest to you that your Success in carrying your motion will be ensured by delay. The members of our Convention & Assembly (a great majority of whom think with you) will soon ⟨leave⟩ our city, & spread your principles & fee⟨lings⟩ thro’ the Country. The clamors in conseque⟨nce⟩ of information being carried home to our farmers, will be loud—violent—& universal.
I have only to request that you would conceal my name in mentioning the Contents of this letter. I have taken no part in the Controversy in this city—and wish to continue a Spectator of its progress & issue.
Mr Peter Muhlenberg will convey an Acknowledgement from you of the receipt of this letter, if your leisure should not permit you to answer it. I am Dear Sir yours sincerely
Benjn: Rush
PS: A regard to what is falsely called National honor in G Britain, produced the independance of America.


Title: Discrimination between Present and Original Holders of the Public Debt, [18 February] 1790
From: Madison, James
To:

[18 February 1790]

   On 15 February the Committee of the Whole resumed consideration of JM’s amendment. JM listened silently for the next three days as numerous speakers attacked his proposal.

Mr. Madison next rose and observed that the opponents of his proposition had imposed on its friends not only a heavy task, by the number of their objections, but a delicate one by the nature of some of them. It had been arraigned as embarrassing measures which ought to be facilitated, and producing discussions which might end in disagreeable consequences. However painful it might be to contradict the wishes of gentlemen whom he respected, he could promise nothing more, in the present case, than his endeavours to disappoint their apprehensions. When his judgment could not yield to the propositions of others, the right to make and support his own was a right which he could never suffer to be contested. In exercising it, he had studied to maintain that moderation and liberality which were due to the greatness of the subject before the committee. He felt pleasure in acknowledging, that the like spirit had in general directed the arguments on the other side. Free discussions, thus conducted, were not only favourable to a right decision, but to a cheerful acquiescence of the mistaken opponents of it. They might have the further advantage of recommending the result to the public, by fully explaining the grounds of it. If the pretensions of a numerous and meritorious class of citizens be not well founded, or cannot be complied with, let them see that this is the case; and be soothed, under their disappointment, with the proof that they have not been overlooked by the country.
He proceeded to review the grounds on which the proposition had been combated; which, he said, he should do without either following those who had wandered from the field of fair argument, or avoiding those who had kept within its limits.
It could not have escaped the committee, that the gentlemen to whom he was opposed had reasoned on this momentous question as on an ordinary case in a court of law; that they had equally strained all the maxims that could favor the purchasing, or be adverse to the original holder; and that they had dwelt with equal pleasure on every circumstance which could brighten the pretensions of the former, or discredit those of the latter. He had not himself attempted, nor did he mean to undervalue the pretensions of the actual holders: in stating them he had even used as strong terms as they themselves could have dictated; but beyond a certain point he could not go. He must renounce every sentiment which he had hitherto cherished, before his complaisance could admit that America ought to erect the monuments of her gratitude, not to those who saved her liberties, but to those who had enriched themselves in her funds.
All that he wished was, that the claims of the original holders, not less than those of the actual holders, should be fairly examined and justly decided. They had been invalidated by nothing yet urged. A debt was fairly contracted: according to justice and good faith, it ought to have been paid in gold or silver: a piece of paper only was substituted. Was this paper equal in value to gold or silver? No: it was worth in the market, which the argument for the purchasing holders makes the criterion, no more than one-eighth or one-seventh of that value. Was this depreciated paper freely accepted? No: the government offered that or nothing. The relation of the individual to the government, and circumstances of the offer, rendered the acceptance a forced, not a free one. The same degree of constraint would viciate a transaction between man and man, before any court of equity on the face of the earth. There are even cases where consent cannot be pretended; where the property of the planter or farmer has been taken at the point of the bayonet, and a certificate presented in the same manner. But why did the creditors part with their acknowledgment of the debt? In some instances from necessity; in others, from a well-founded distrust of the public. Whether from the one or the other, they had been injured: they had suffered loss through the default of the debtor, and the debtor cannot, in justice or honor, take advantage of the default.
Here then was a debt acknowledged to have been once due, and which was never discharged, because the payment was forced and defective. The balance consequently is still due, and is of as sacred a nature as the claims of the purchasing holder can be; and if both are not to be paid in the whole, is equally entitled to payment in part.
He begged gentlemen would not yield too readily to the artificial niceties of forensic reasoning; that they would consider not the form, but the substance—not the letter, but the equity—not the bark, but the pith of the business. It was a great and an extraordinary case. It ought to be decided on the great and fundamental principles of justice. He had been animadverted upon, for appealing to the heart as well as the head: he would be bold, nevertheless, to repeat, that, in great and unusual questions of morality, the heart is the best casuist.
It had been said, by a member from Massachusetts, that the proposition was founded on a new principle in Congress. If the present Congress be meant, that is not strange, for Congress itself is new: if the former Congress be meant, it is not true, for the principle is found in an act which had been already cited. After the pay of the army had, during the war, been nominally and legally discharged in depreciated paper, the loss was made up to the sufferers.
It had been said, by a member from New-York, that the case was not parallel, there being no third party like the present holder of certificates. This objection could not be valid. The government paid ten dollars, worth in fact but one, to a soldier: the soldier was then the original holder. The soldier assigned it to a citizen; the citizen then became the actual holder. What was the event? The loss of the original holder was repaired, after the actual holder had been settled with according to the highest market value of his paper.
He did not mean, however, to decide on the whole merits of this last transaction; or to contend for a similitude, in all respects, between the two kinds of paper. One material difference was, that the bills of credit, by more frequent transfers, and by dividing the change of value among a greater number of hands, rendered the effect of less consequence to individuals, and less sensible to the public mind. But this difference, whatever force it might give to the claims of the purchasing holder of certificates, could diminish nothing from the claims of the original holders who had assigned them.
It had been said by another member, from Massachusetts, that the old government did every thing in its power. It made requisitions, used exhortations, and in every respect discharged its duty; but it was to be remembered, that the debt was not due from the government, but the United States. An attorney with full powers to form, without the means to fulfil engagements, could never by his ineffectual, though honest efforts, exonerate his principal.
He had been repeatedly reminded of the address of Congress in 1783, which rejected a discrimination between original and purchasing holders. At that period, the certificates to the army, and citizens at large, had not been issued. The transfers were confined to loan-office certificates, were not numerous, and had been in great part made with little loss to the original creditor. At present the transfers extend to a vast proportion of the whole debt, and the loss to the original holders has been immense. The injustice which has taken place has been enormous and flagrant, and makes redress a great national object. This change of circumstances destroys the argument from the act of Congress referred to; but if implicit regard is to be paid to the doctrines of that act, any modification of the interest of the debt will be as inadmissible as a modification of the principal.
It had been said, that if the losses of the original creditors are entitled to reparation, Congress ought to repair those suffered from paper money, from the ravages of the war, and from the act barring claims not produced within a limited time. As to the paper money, either the case is applicable or it is not: if not applicable, the argument falls; if applicable, either the depreciated certificates ought to be liquidated by a like scale, as was applied to the depreciated money, or the money, even if the whole mass of it was still in circulation, ought now to be literally redeemed like the certificates. Leaving the gentleman to make his own choice out of these dilemmas, he would only add, himself, that if there were no other difference between the cases, the manifest impossibility of redressing the one, and the practicability of redressing the other, was a sufficient answer to the objection. With respect to the towns burnt, and other devastations of war, it was taught by the writers on the law of nations, that they were to be numbered among the inevitable calamities of mankind. Still, however, a government owed them every alleviation which it could conveniently afford; but no authority could be found that puts on the same footing with those calamities, such as proceed from a failure to fulfil the direct and express obligations of the public. The just claims barred by the act of limitation were, in his opinion, clearly entitled to redress. That act was highly objectionable. The public which was interested in shortening the term, undertook to decide that no claim, however just, should be admitted, if not presented within nine months. The act made none of the exceptions usual in such acts, nor even in favor of the most distant parts of the union. In many instances it had been absolutely impossible for the persons injured to know of the regulation. Some of these instances were within his own knowledge. To limit the duration of a law to a period within which it could not possibly be promulged, and then taking advantage of the impossibility, would be imitating the Roman tyrant, who posted up his edicts so high that they could not be read, and then punished the people for not obeying them.
It had been said, that if the purchased certificates were funded at the rate proposed, they would fall in the market, and the holders be injured. It was pretty certain that the greater part, at least, would be gainers. He believed that the highest market rate, especially with the arrears of interest incorporated, well funded at 6 per cent. would prevent every loss that could justify complaint.
But foreigners had become purchasers, and ought to be particularly respected. Foreigners, he remarked, had themselves made a difference between the value of the foreign and domestic debt; they would therefore the less complain of a difference made by the government here. It was his opinion that the terms stated in the proposition, would yield a greater profit to the foreign purchasers than they could have got for their money advanced by them in any of the funds of Europe.
The proposition had been charged with robbing one set of men to pay another. If there were robbery in the case, it had been committed on the original creditors. But, to speak more accurately, as well as more moderately, the proposition would do no more than withhold a part from each of two creditors, where both were not to be paid the whole.
A member from New-York had asked whether an original creditor, who had assigned his certificate, could in conscience accept a reimbursement in the manner proposed? He would not deny that assignments might have been made with such explanations, or under such circumstances, as would have that effect. But in general the assignments had been made with reference merely to the market value, and the uncertainty of the steps that might be taken by the government. The bulk of the creditors had assigned under circumstances from which no scruple could arise. In all cases where a scruple existed, the benefit of the provision might be renounced. He would in turn ask the gentleman, whether there was not more room to apprehend that the present holder, who had got his certificate of a distressed and meritorious fellow-citizen, for one-eighth or one-tenth of its ultimate value, might not feel some remorse in retaining so unconscionable an advantage?
Similar propositions, it was said, had been made and rejected in the state legislatures. This was not fact. The propositions made in the state legislatures were not intended to do justice to the injured, but to seize a profit to the public.
But no petitions for redress had come from the sufferers. Was merit then to be the less regarded, because it was modest? Perhaps, however, another explanation ought to be given. Many of the sufferers were poor and uninformed. Those of another description were so dispersed, that their interests and efforts could not be brought together. The case of the purchasing holders was very different.
The constitutionality of the proposition had been drawn into question. He asked whether words could be devised that would place the new government more precisely in the same relation to the real creditors with the old? The power was the same; the obligation was the same: the means only were varied.
An objection had been drawn from the article prohibiting ex post facto laws. But ex post facto laws relate to criminal, not civil cases. The constitution itself requires this definition, by adding to a like restriction on the states, an express one against retrospective laws of a civil nature.
It had been said that foreigners had been led to purchase, by their faith in the article of the constitution relating to the public debts. He would answer this objection by a single fact: foreigners had shewn by the market price in Europe, that they trusted the nature of the foreign debt more under the old government, than the nature of the domestic debt under the new government.
Objections to the measure had been drawn from its supposed tendency to impede public credit. He thought it, on the contrary, perfectly consistent with the establishment of public credit. It was in vain to say that government ought never to revise measures once decided. Great caution on this head ought, no doubt, to be observed: but there were situations in which, without some legislative interposition, the first principles of justice, and the very ends of civil society, would be frustrated. The gentlemen themselves had been compelled to make exceptions to the general doctrine: They would probably make more before the business was at an end.
It had been urged that if government should interpose in the present case, as interposition would be authorised in any case whatever, where the stock might fluctuate; the principle would apply as well to a fall of 60 or 70 per cent. as to a fall of 600 or 700 per cent. He could not admit this inference. A distinction was essential between an extreme case and a case short of it. The line was difficult to be drawn; but it was no more incumbent on him, than on his opponents, to draw it. They themselves could not deny that a certain extremity of the evil would have justified the interposition. Suppose that the distress of the alienating creditors had been ten times as great as it was; that instead of 2, 3 or 4s. in the pound, they had received a farthing only in the pound; and that the certificates lay now in the hands of the purchasers in that state, or even at a less value: was there a member who would rise up and say, that the purchasers ought to be paid the entire nominal sum, and the original sufferer be entitled to no indemnification whatever?
Gentlemen had triumphed in the want of a precedent to the measure. No government, it was said, had interposed to redress fluctuations in its public paper. But where was the government that had funded its debts under the circumstances of the American debt? If no government had done so, there could be no precedent either for or against the measure, because the occasion itself was unprecedented. And if no similar occasion had before existed in any country, the precedent to be set would at least be harmless, because no similar occasion would be likely to happen in this.
If gentlemen persisted, however, in demanding precedents, he was happy in being able to gratify them with two, which, though not exactly parallel, were on that account of the greater force, since the interpositions of government had taken place where the emergency could less require them.
The first was the case of the Canada bills. During the war, which ended in 1763, and which was attended with a revolution in the government in Canada, the supplies obtained for the French army in that province were paid for in bills of exchange and certificates. This paper depreciated, and was bought up chiefly by British merchants. The sum and the depreciation were so considerable, as to become a subject of negociation between France and Great Britain at the peace. The negociations produced a particular article, by which it was agreed by France that the paper ought to be redeemed, and admitted by Great-Britain that it should be redeemed at a liquidated value. In the year 1766 this article was accordingly carried into effect by ministers from the two courts, who reduced the paper in the hands of the British holders, in some instances, as much as 75 per cent. below its nominal value. It was stated, indeed, by the reporter of the case, that the holders of the paper had themselves concurred in the liquidation; but it was not probable that the concurrence was voluntary. If it was voluntary, it shews that they themselves were sensible of the equity of the sacrifice.
The other case was of still greater weight, as it had no relation to war or to treaty, and took place in the nation which has been held up as a model with respect to public credit. In the year 1713, the civil list of Great-Britain had fallen into arrears to the amount of [£]500,000. The creditors who had furnished supplies to the government had, instead of money, received debentures only from the respective offices. These had depreciated. In that state, they were assigned in some instances; in others, covenanted to be assigned. When the parliament appropriated funds for satisfying these arrears, they inserted an express provision in the act, that the creditors who had been obliged by the default of government to dispose of their paper at a loss, might redeem it from the assignees, by repaying the actual price with an interest of six per cent. and that all agreements and covenants to assign should be absolutely void. Here then was an interposition on the very principle, that a government ought to redress the wrongs sustained by its default, and on an occasion trivial when compared with that under consideration; yet it does not appear that the public credit of the nation was injured by it.
The best source of confidence in a government was the apparent honesty of its views. The proposition on the table could not possibly be ascribed to any other motive than this, because the public was not to gain a farthing by it. The next source was an experienced punctuality in the payments due from the government. For this support to public credit, he relied on what had been experienced by a part of the foreign creditors; on the provision to be made for the residue; and on the punctuality which he flattered himself would be observed in all future payments of the domestic creditors. He was more apprehensive of injury to public credit from such modifications of the interest of the public debt, as some gentlemen seemed to have in view. In these the public would be the gainer, and the plea of inability the more alarming; because it was so easy to be set up, so difficult to be disproved, and consequently for which the temptations would be so alluring.
The impracticability of the measure was the remaining ground on which it had been attacked. He did not deny that it would be attended with difficulties, and that perfect justice would not be done: but these were not the questions. It was sufficient that a grievous injustice would be lessened, and that the difficulties might be surmounted. What he had in view was that, for the conveniency of claimants, some authority should be provided and properly distributed thro’ the union, in order to investigate and ascertain the claims; and that for the security of the public the burden of proof should be thrown on the claimants. A scrutiny on this plan, aided by original settlements in the books of the army department, and the state commissioners, and other office-documents, would be a remedy at once for all the difficulties started with regard to fictitious names, certificates issued as money by commissaries and quarter-masters, due-bills, &c.
For some particular cases special provisions might be requisite. The case of loan-office certificates, alienated at early periods, before they were much depreciated, fell under this description. Legacies might be another. He should have no objection to some special regulation, as to the payments of debts in certificates to persons within the British lines, said to have been authorised by the laws of New-York; though he presumed few such payments had been made, and that of these few the greater part had by this time passed from the creditors into other hands. There might be a few other cases equally entitled to some particular attention in the details of the provision. As to the merchants who had compounded for their debts in certificates, or persons who had exchanged bonds for them, it could not be doubted that the transactions had reference to the market value of the paper, and therefore had nothing peculiar in them.
The expence incident to such a plan of investigation ought to form no difficulty. It bears no proportion to the expence already incurred by commissioners, &c. for effecting a less proportion of justice. Rather than justice should not be done, the expence might be taken out of the portion to the original sufferers.
The danger of frauds and perjuries had been worked up into a formidable objection. If these had always been equally alarming, no provision could have ever been made for the settlement or discharge of public debts. He reminded the committee of the frauds and perjuries for which a door had been opened by the final settlements, &c. of the frauds and perjuries inseparable from the collection of imposts and excises: yet these were all submitted to as necessary evils, because justice could not be done without them. The frauds and perjuries incident to this supplementary provision for justice, must be very inconsiderable in number; and still more so, when compared either with the object to be attained, or with the like evils already encountered in pursuit of a like object.
Great ingenuity and information had been exerted, by gentlemen on the other side, in raising difficulties: he was sure that, after an adoption of the proposition, the same exertion would be used in removing them, and with such aid the idea of impracticability would vanish.

   N.Y. Daily Gazette, 23 and 24 Feb. 1790 (reprinted in Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., III, 412–21, and Gazette of the U.S., 3 Mar. 1790).

   JM referred to the resolve of Congress of 10 Apr. 1780 relating to the depreciation of pay (JCCWorthington C. Ford et al., eds., Journals
          of the Continental Congress, 1774–1789 (34 vols.; Washington, 1904–37)., XVI, 344–45).

   This address, drafted by JM, declared that to discriminate between original and present holders “would be a task equally unnecessary & invidious. If the voice of humanity plead more loudly in favor of some than of others; the voice of policy, no less than of justice pleads in favor of all” (PJMWilliam T. Hutchinson et al., eds., The
          Papers of James Madison (vols. 1–10, Chicago, 1962–77; vols. 11—, Charlottesville,
        Va., 1977—)., VI, 493).

   See the resolutions of 2 Nov. 1785 and 23 July 1787 (JCCWorthington C. Ford et al., eds., Journals
          of the Continental Congress, 1774–1789 (34 vols.; Washington, 1904–37)., XXIX, 866; XXXIII, 392).

   Probably Emperor Gaius Caligula, of whom Suetonius wrote: “When taxes of this kind had been proclaimed, but not published in writing, inasmuch as many offences were committed through ignorance of the letter of the law, he at last, on the urgent demand of the people, had the law posted up, but in a very narrow place and in excessively small letters, to prevent the making of a copy” (Suetonius, Loeb Classical Library [1913–14; 2 vols.; Cambridge, Mass., 1970 reprint], I, 469).

   This word taken from the text of Annals of CongressDebates and Proceedings in the Congress of
          the United States, 1789–1824 (42 vols.; Washington, 1834–56). (N.Y. Daily Gazette and Gazette of the U.S. have “objection”; Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4). has “object”).

   A declaration concerning the so-called Canada bills was appended to the Treaty of Paris of 1763. A “Convention for the Liquidation of the Canada Paper Money” was signed on 29 Mar. 1766 by Henry Seymour Conway and Count de Guerchy. JM may have obtained his information from John Almon, comp., A Collection of All the Treaties … between Great-Britain and Other Powers, from … 1688, to the Present Time (2 vols.; London, 1772), II, 291–92, 296–308.

   For the 1713 act, see 12 Ann., chap. II (Statutes at Large [1769 ed.], IV, 604–9). JM referred to the thirty-fourth section of that act.

[18 February 1790]

   Benson posed this question to JM: “Suppose I had purchased a certificate of 100 dollars of him, which, when I go to fund, I find but the half allowed me, the other 50 dollars are retained in the treasury for him: Now, I ask, whether, if I was to state to him the fact, he would take advantage of the law against me, and refuse to give me authority to take it up in his name?” (Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., III, 422).

Mr. Madison. I thought I had answered this question, in some degree, when I was up before: I said it should depend on the circumstances of the transaction between the two individuals. If by the contract it was agreed, or the idea particularly understood, was, that the assignee should be entitled to all advantages whatsoever, which the discretion of the government should afterwards grant, then I believe the individual transferring, would be restrained by a necessary scruple; but if the certificate had passed from hand to hand, both parties knowing the uncertainty, as to what steps the government would pursue, I do not see that the most tender conscience need be restrained from taking the benefit of what the government should afterwards determine. But it was to be remembered, that a greater part of the transfers had been made, under circumstances that left us room to suppose, that original creditors were restrained from accepting an equitable compensation of their cases.
How would the observation apply to the case of the old depreciated money paid to the army? Suppose a soldier had paid away the money received by him, or assigned his arrears of pay, would the assignee be in equity entitled to the benefit of the act, for making up the depreciation? Or was it ever understood that the soldier was bound in conscience to renounce the benefit in favor of the assignee?
I would beg leave now, in turn, to ask the gentleman a question: Suppose he had been one of those who resorted to our army at the time it was disbanded, and had found a soldier, one of that band, who had established the liberties of his country, and had heard the declaration of his beloved commander, “That his country would finally do him ample justice,” turned loose, not with the payment in gold or silver solemnly stipulated, but with a piece of paper, such as was subsisted? And suppose that the gentleman had obtained, from the necessities of the soldier, the evidence of his claim, at a tenth of its value; and had either received from the interposition of his state, the payment of 60 per cent. on his advance, or was now to have that interest with the principal, or even half the principal funded. I ask whether the delicacy of the gentleman would not be shocked at the reflection that this exhorbitant accumulation of gain was made at the expence of the most meritorious part of the community, and whether his conscience could refuse a participation of it to the sufferer?

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., III, 422–23 (also reported in N.Y. Daily Gazette, 24 Feb. 1790).

   The quotation paraphrases a passage from Washington’s Circular to the States, June 1783 (Fitzpatrick, Writings of WashingtonJohn C. Fitzpatrick, ed., The Writings of
          George Washington, from the Original Sources, 1745–1799 (39 vols.; Washington,
        1931–44)., XXVI, 491).

   Laurance disputed JM’s precedents for a discrimination, as did Ames, who said that “placing the proposition on the ground of precedent appears to be an abandonment of the principle of right.” JM reminded his opponents that they had repeatedly called for precedents, “especially from Great-Britain, which nation was held up to us as a model” (Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., III, 449).


Title: Discrimination between Present and Original Holders of the Public Debt, [19 February] 1790
From: Madison, James
To:

[19 February 1790]

   Speaking against JM’s motion, Burke said that many officers and soldiers had received conspicuous marks of gratitude for their services, notably in appointments to civil offices.

Mr. Madison. If paper, or the honor of statues or medals, can discharge the debts of justice, payable in gold and silver, we can not only exonerate ourselves from those due to the original holders, but from those of the assignees; so far as paper goes, the latter have received the compensation. If honor can discharge the debt, they have received civil honors; look round to the officers of every government in the union, and you find them sharing equal honors with those bestowed on the original creditors: But, sir, the debt due in gold and silver, is not payable in honor nor appointments, nor in paper.
Gentlemen say it will work injustice; but are we not as much bound to repair the injustice done by the United States? Yet I do not believe the assertion has been established by any thing that has been urged in its support. The gentleman from Maryland, (Mr. Stone) acknowledges that there is a moral obligation to compensate the original holders; how will they get what he admits is their due? He is willing to make an effort by applying the resources of the country to that purpose; but if we are to judge by the sentiments of other gentlemen who have spoken on this occasion, we have little to expect from that quarter. Suppose the debt had depreciated to a mere trifle, and suppose the sale of the Western Territory had extinguished the certificates, let me ask, whether, if the United States had thus exonerated themselves from the obligation to the assignee, whether the claim of the original holder would not still remain in its full force in a moral view? But believing the point of justice to be exhausted, I will just add one remark upon the practicability: The transferred certificates, generally, will shew the names of the original holders, and here there is no difficulty. With respect to those granted to the heads of either of the five great departments, the books of the treasurer of loans, as well as the accounts of those departments now in the treasury will designate, with a great degree of accuracy, and this may be followed up by the usual mode of obtaining evidence; and I believe, every security may be provided against fraud in this case, as was provided in the case of the commissioners who were sent into the respective states for ascertaining and liquidating the claims of individuals. That there will be some difficulty I admit, but it is enough for me that it is not insuperable; and I trust, with the assistance which the cause of equity and justice will ever obtain from the members of the national legislature, they will easily be surmounted.


Title: To James Madison from John Dawson, 26 February 1790
From: Dawson, John
To: Madison, James

Dear Sir.
Richmond Feby 26. 1790
You’ll be pleasd to accept my thanks for your favour of the 31st ulto which I recievd in due time. I am by no means astonishd at the reports of the two Secretaries given rise to a variety of opinions. The subjects to which they refer are both incricate [sic], and the interest of different persons will induce them to adopt various opinions. Mr. Hamilton’s plan, altho it discovers knowledge & investigation is not thought altogether orthodox in this place. The Ideas of 4 per cent—Tontines—& western lands are not very agreeable to gentlemen, who have set snug in their corners for these several years past and drawn their six prCent. Curious indeed have been the speculations in public securities for these last six weeks—on one day at 10/. the next at 8/. & on yesterday the Agent of the sinking fund made a very considerable at 6/8 in the Pound—of certificates sent from New York for sale. As the management of this fund is submitted to the executive I will thank you for any information which may Prevent Singletons being playd on by the Speculators who have always the earliest intelligence.
We hear that the King of Prusia has declard war against Russia—if so the price of our g[r]ain will probably keep up. Wheat lately at 9/– is now at 8/– corn at 20/. and tobacco at this place 25/. What an excellent opportunity our country men have of freeing themselves from that load of debt which they contracted at the close of the late war, with a little frugality and industry. Mr. Jefferson is expected in this place in about 10 days, on his way to New York. It is said that on the receipt of a letter from the President lately he has determind to accept of the appointment of S. of S. As your papers will contain some interesting debates will you be pleasd to forward them. With respect & esteem Yr. friend
J Dawson


Title: To James Madison from Samuel Vaughan, Jr., 26 February 1790
From: Vaughan, Samuel
To: Madison, James

Dr Sir
St James’s Jamaica, 26 Feby: 1790
With this letter you will receive a Pamphlet, you was so obliging as to lend me, & which from inadvertency I never returned. I was much surprised on opening my things here to find it among them.
I congratulate you most heartily on the facility you are likely to meet with in the various objects of the Legislature. It was always my opinion that you might be bolder, particularly in your commertial System. Fostering of Prejudices is fostering of future Evils; & without a necessity, if these Prejudices are not religious ones, & if measures do not affect the Purses of the People. All the Arguments in favor of Civil Liberty apply with equal force in the case of Commercial freedom. Indeed more is to be said in favor of the first than the last. A restriction in Civil Liberty may give energy to a government, & turn to the Aggrandisement of the Family at the Head of it. But Commercial restrictions can add neither to the means, Magnificence or Energy of a Government; & of Evils that arise from them, surely it is no small one to keep alive the resentments of Nations against each other. If we examine the fact I believe we shall find not a single instance in which a Nation has clearly benefited by them. I will not except the famous Navigation Act: for the supposed advantages or ends gained by it, may either with equal justice be attributed to other causes, or may be produced without this one of Restriction. Take for instance that of National Defence. Those who live by you will surely fight for you; & that which is admitted in Armies, should & may be made to be equally Legal in Marines, viz Recruits from all Nations indiscriminately. The Custom is different in the two Cases at present, because Nations had Pyracy to guard against; but now that this Danger is removed, the declaration of a Single Protector might establish the Custom in the one as is in the other case. Indeed to go farther, I shall not be surprised if I live to see the Body of Marines like the Amazons of old become a distinct Nation independant of all others, altho’ owing their very Existence to them.
Excuse me for troubling you with a Political Speculation when you are pestered so much with them otherwise. I have been insensibly lead on, for I had no intention of it, both as I believe we fundamentally agree in Principle tho’ not in opinion respecting Measures; & as I think the Light & Reason that has opened on the World will produce a Reformation in Measures soon enough for the good of Humanity.
Remember me to Mr Page & Mr White, & any other friends of mine that may be with you. With the greatest respect & esteem I am Dear Sir Your most obedt & hble Servt.
Samuel Vaughan Junr


Title: Assumption of the State Debts, [26 February] 1790
From: Madison, James
To:

[26 February 1790]

   JM’s amendment to the assumption resolution was still before the Committee of the Whole. On 25 February, White moved to confine the assumption to the surplus funds a state had “advanced beyond its just and equal proportion of the expences, incurred in the defence of the common rights of America.” After two days’ debate, this motion was defeated by a vote of 32 to 18.

Mr. Madison Then begged leave to submit a proviso to his original proposition of amendment.… He believed there was but one ground upon which the assumption of the state debts could be justified; and that was, securing, at the same time, a speedy and effectual provision for the liquidation and apportionment of the expenditures of the late war. The object of the proviso was to secure this important ground; he would read it and lay it on the table for the consideration of the committee—it was as follows:

“Provided, that in case a final liquidation and adjustment of the whole of such expenditures, and provision for the payment of the balances due from debtor states to creditor states, shall not be made before the  day of , the debts assumed shall be liquidated and adjusted among the states, according to the ratio of representation, and effectual provision be forthwith made for paying the balances to the creditor states at the expence of the debtor states.”


Title: To James Madison from Benjamin Rush, 27 February 1790
From: Rush, Benjamin
To: Madison, James

Dear Sir,
Philadelphia Feb: 27th 1790.
In answer to your polite letter, I have only to repeat my congratulations to you for the honor you have done to the claims of justice and patriotism by your motion. The small number of the minority that rose to support it, does not lessen its merit. The decision upon that great Question will leave a stain upon our Country which no time nor declammation can ever wipe away. History will decide very differently upon it. Perhaps in the course of our lives we may hear it reprobated by the very Men Who have been its Advocates, for I take it for granted that the whole of the Certificates will be bought up by foreigners as soon as they reach their nominal Value, and then the people of America will speak One language upon this Subject. Such a decision I am sure would not have taken place had the Congress been seated on the Banks of the Delaware or Potowmac. Public Opinion is a Species of influence—and this I well know has been exerted too successfully in New York on some of your members. The desertion of principles, which the clamors of Speculators have created in New York in your house, has given me a melancholly proof that we want much of the Spirit & dignity of true republicans in our Country.
The weight of reason—morality—and even religion is so great on your Side of the Question, that I wonder that a man of any character should have opposed it. The same arguments would justify the African Slave trade, that were used against you viz national honor pledged to the African Company, and political necessity, and the man who can receive 4 or 6 ⅌ cent on an £100 for which he gave only ten, without inviting the man from whom he Obtained this unequal bargain to share in the immense profit which has accrued upon it, is but a few degrees removed from that State of mind which would lead to high way robbery.
Mr. Miller the bookseller of London gave Dr Robertson £500 for his history of Scotland—but such was its reputation that the bookseller made several thousand pounds by the Sale of it. As a compensation to Dr Robertson for the unequal bargain Mr Miller had made with him, he sent him every year as long as he lived Afterwards a pipe of madeira Wine. This was natural justice. Its Obligations are infinitely more binding upon Congress in the case lately before them.
In reviewing the decision upon your motion, I feel disposed to wish that my name was blotted out from having contributed a single mite towards the American revolution. We have effected a deliverance from the national injustice of Great Britain, to be subjugated by a mighty Act of national injustice by the United States.
It is amusing to hear Gentlemen talk of the “public blessing” of a debt contracted to foreigners & a few American Speculators of four or five millions of dollars a year. Nothing fundamentally unjust, can ever produce happiness in its issue. It will lay the foundation of an Aristocracy in our Country. It will change the property of nine tenths of the freeholders of the States, and it will be a lasting monument of the efficacy of idleness—speculation & fraud Above industry Œconomy & integrity in obtaining wealth & independance. Nor is this all. It will be a beacon to deter Other nations & future generations from attempting to better their situations, for it clearly establishes this proposition, that revolutions like party Spirit, are the rage of many for the benefit of a few. The Abbe Raynell in speaking of the name of America being derived from Americus instead of Columbus, says “it was a presage that America was to be the theatre of future Acts of injustice.” The extirpation of the Indians by the Spaniards in South America—the importation of slaves into the southern states—and even the depradations committed upon our country by the British Army during the late war, are not more striking proofs of the truth of that Observation than the establishment of the principles of the Speculators in the rejection of your motion in Congress.
Good men sigh and deplore in Secret the measures which are expected to follow that unfortunate event. You are happy in having your name upon record as an enemy to it. I am not called upon to give a public Opinion upon it, nor do I feel disposed to oppose it, as I have often done Vice & error in the public papers, but I shall leave a testimony upon record against it for the information of my Children, for they are the only part of posterity by whom I wish to be remembred, or known hereafter.
Our Country people are as yet uninformed or deceived in this important business. Delay—delay—delay therefore will do wonders for you.
The combined influence of British Agents—New York tories and anti-federalists—and New York aristocratical whigs upon the Councils of the United States, have long ago led me to wish that the Seat of Congress was on the Delaware—the Susquehannah or the Potowmac. The sooner this Question is determined the better.
I have only to request that these broken tho’ts may rest in your own bosom, & to add that I am very sincerely yrs
Benjn Rush
PS: The extracts contained in the enclosed pamphflet shew that mankind are growing wiser upon the Subject of penal laws.
The report of your Se[c]retary of War seems to indicate a retrograde progress upon the Subject of Murder by War. He seems to consider Man as created not to cultivate the earth—or to be happy in any of the pursuits of civilized life, but to carry a Musquet—to wear a regimental coat—& to kill or be killed. It is better to prevent Wars, than to learn the Art of carrying them on successfully. For this purpose let military Shews (so fascinating to young people) be rare—and if possible let the military character be stripped of its glare—and even rendered unpopular. Half the money demanded by General Knox’s report spent in establishing free Schools, & in teaching our young people industry & morality, would extirpate war for ever from the United States. The successful issue of the late war under a thousand disadvantages that can never occur again, proves that militia establishments in the time of peace are wholly unnecessary. We lose the Attainment of great Objects by not attempting them. The preamble of a single law of Congress declaring in strong terms the folly & Absurdity as well as inhumanity of War, would be [sic] do more good than a thousand Volumes written against it. A proposition from the United States to some of the Courts of Europe to concur in the Appointment of Umpires to decide national disputes without appealing to Arms, would be considered as Utopian at present, but it would be successful in 40, or 50 years. Truths resemble trees—some ripen in a short time—while Others require half a century or more to bring them to perfection. But the Seeds of the latter must be planted, as well as of the former, by some body. To plant a forest tree says Dr Johnson is the most disinterested Act of benevolence a Man can perform, for it is impossible for him to live long eno’ Afterwards, to enjoy any benefit from his labor. To sow the seed of a truth, or of a revolution in favor of human happiness that requires many years to ripen it, is equally a mark of disinterested benevolence. The Seeds of truth differ from the seeds of plants in One particular. None of them are ever lost. Like matter they are indestructable in their very Nature. They produce fruit in Other Ages or Countries. The Seeds of the American revolution were sown in the reign of Charles the first. The Seeds of the reformation were sown in England in the reign of Henry the IVth. The Seeds of the present humane & enlightned policy upon the Subject of the Slavery of the Negroes, were sown in Pennsylvania near 20 years ago. Many other instances of a distant & improbable Connection between the first proposition, & the Accomplishment of events might be mentioned. Your extensive reading & observation will naturally suggest them. To oppose popular prejudices, or to propose plans of human happiness that cannot be perfected in the Course of a single life, I know subjects a man to the imputation of being a Speculator, but as long as his Speculations are not in the blood or limbs of poor Soldiers, there can be no disgrace in them here, or remorse from them hereafter.
Excuse the length of this postscript. My heart ran away with me—& my pen followed it.


Title: From James Madison to Walter Jones, 28 February 1790
From: Madison, James
To: Jones, Walter

Letter not found. 28 February 1790. Acknowledged in Jones to JM, 25 Mar. 1790. Reports recent illness.


Title: To James Madison from Philip Pendleton, 1 March 1790
From: Pendleton, Philip
To: Madison, James

Dear Sir,
Berkeley March 1st. 1790.
I am informed that a vacancy has happened in the Supreme Court for the Western Territory, which perhaps may not be yet fill’d. I am strongly press’d by my Freinds in the Western Country to solicit the appointment which I confess wou’d be highly agreeable to me. The vacancy I mean is in consequence of the death of General Parsons. If my pretensions shou’d meet your Approbation—your kind offices with the President will greatly oblige me and in that case you will be so good as to deliver the inclosed Lre. to the President.
The great number of the Citizens of this State who have become adventurers in that Country will certainly warrant an Appointment of one of the Judges at least from Virginia. I am Dr. Sir with great esteem Yr. Obt. Servt.
Phil. Pendleton
I have written to my freind Mr. White—upon the subject and I have no doubt of his freindly Assistance.


Title: Assumption of the State Debts, [1 March] 1790
From: Madison, James
To:

[1 March 1790]

   The assumption resolution was still under consideration.

Mr. Madison. The motion which yesterday I laid on the table, upon reflection I find to be out of order, as the principle was involved in the proposition, made by my colleague, (Mr. White) and decided against by the committee; I therefore withdraw it: But, I give notice that I mean hereafter to submit to the consideration of the committee, another variation of the plan, which may be thought more consistent with sound policy; at the same time, I am persuaded it will have a conciliatory tendency. One great objection to the original proposition is, that by taking up the debts of the several states, as you find them now, you do great injustice to those states, who have, by their exertions, discharged the greatest part of the equal debts contracted during the late war: By this means compelling them, after having done their duty, to contribute to those states who have not equally done their duty: Now, my idea is, that instead of considering the debts as they are found at this moment, we contemplate them as in the state they existed at the close of the late war; and where it is discovered that a state has extinguished her debt since the peace, the state shall, in all such cases, stand in the place of the original creditor, then there will result some degree of equality; all will be benefited in due proportion: This will give the proposition such an appearance of equality and liberality, as will do more to reconcile it, if any thing can be supposed to reconcile it, to all the states, than any thing I have yet heard suggested; but as the present is not the proper place to which such an amendment will apply, I shall delay making the motion for the present.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 72–73.

   This was JM’s motion of 26 Feb., when the House had last met.

[1 March 1790]

   The Committee of the Whole agreed to JM’s amendment of 24 February to the assumption resolution.

Mr. Madison. I conceive it now to be necessary to bring before the committee the fourth alteration in the proposition for assuming the state debts, which I suggested when I was up before—it is as follows:
“Resolved, That the amount of the debts actually paid by any state to its creditors, since the  day of  shall be credited and paid to such state, on the same terms as shall be provided in the case of individuals.”
In filling up the blanks, I propose to contemplate the debts as they stood at the termination of the late war; if the exertions of the respective states were, at that period, equal, and it is presumable they were, this will be doing justice to those, who, by superior exertions since, have extinguished a considerable part of the capital, and will consequently lessen the inequality which may be charged on the original proposition. I believe it is not liable to any objection which does not lie with greater force against the original proposition. The whole subject is very delicate, and perhaps cannot be made universally agreeable; but I think this amendment will free it from many of the evils which gentlemen apprehend.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 80–81.

   Jackson objected that this proposition “would oblige the citizens to pay their taxes over again; and he did not approve of laying greater burthens on his constituents than they were, in justice, bound to bear.” JM “admitted that it would not give effectual relief to the citizens of those states who had sunk a great part of the principal of their debt: His only object was to give every state an equal advantage, as far as was practical upon the plan of the assumption.”

[1 March 1790]

   Ames and Sedgwick opposed JM’s amendment.

Mr. Madison. When I was up before, I explained my ideas in general terms: I supposed the assumption of the state debts, on any principle, would be liable to strong objections, some of the objections are of a political nature, and some on principles of œconomy. The operation of it will, undoubtedly, be unfavorable to some states, in both respects; the distant states especially: There is no other way to obviate these objections, than by making our measures subservient to the ultimate settlement of the accounts between the United States and individual states, as in this alone can equality be found: So far then, as this object is kept in view, it may have my approbation; but on no other condition.
I wish the gentleman had stated his objections to my motion in a determinate manner, because it might then have been discovered upon what principles it is wrong; but for my own part, I do not see any thing he could urge against it, but what would lie with greater force against the proposed assumption.
A great inequality must take place, if the existing debts only are assumed; this cannot fail of giving umbrage to a great proportion of the citizens of the United States; but the displeasure may be lessened as you lessen the inequality, and the evil will be rendered more supportable.
It was observed, that by transforming the debts into continental debts, it would circulate the revenue pretty generally, in the respective states in which it was collected—the amendment will do this more effectually; and if any thing can compensate the states for the taxes which the general government must lay, in case of the assumption, it will be that the revenue is absorbed by the citizens of the states within whose limits it was collected; but it has been demonstrated that the consequences would be the reverse; the moment you transform the state into continental debts, they will pursue the same course—they will flow to the centre of the union, and the distant states will receive no regular returns in the form of interest for the sums collected at the extremes of the continent. This will operate as a very powerful objection, and can only be counteracted by adopting the present motion, which will throw into the state treasuries certain annual returns, to be distributed again among the citizens of the state. I do not suppose that the amendment would make the measure perfectly agreeable; but I think it would render it less unpalatable, and tend to give some degree of satisfaction—to this end are directed all my efforts; if any person says they appear to him in any other light, I shall not attempt to answer him in any other manner than by appealing to the general import of my conduct, both within and without these walls, for the rectitude of my intentions.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 84–85 (also reported briefly in N.Y. Daily Gazette, 4 Mar. 1790).

[1 March 1790]

   Gerry, FitzSimons, and Sedgwick spoke against JM’s amendment.

Mr. Madison. The gentleman from Massachusetts says, that my objections to the assumption goes against funding altogether. I believe funding, in any shape, to be an evil; but it is an evil we are obliged to submit to in one case, but not in another. I did not concur to the second and third propositions because I thought them beneficial, but because I thought we were under an indispensable obligation to provide, in the best manner we were able, for the performance of our engagements; but with respect to the state debts, I feel no such obligation; the cases are widely different.
The original proposition does not draw any distinction between those debts of the states which were contracted for the general or particular defence, or those contracted for private purposes; neither have I made any distinction in the amendment—presuming, that if the first can be adopted, the latter may, with equal ease, be assented to; and nothing can be urged particularly against the last. It is said that the amendment will increase the amount of the debt—no doubt it will be a considerable addition; but then I do not conceive this furnishes any more an argument against it than it does against the assumption of the debts in the hands of individuals; yet, at the same time, the satisfaction it will give the public at large, will more than overbalance the inconvenience arising from the increase of the debt.
I admit that there will some inequality, arise; but is there not a much greater inequality attached to the original proposition? I venture to say, so far as can be determined from probability, that some states, which will ultimately be creditors of the United States, will be called upon to pay much more than the states which have not made equal exertions. As we cannot altogether avoid the inequality, I think it prudent to attempt to lessen it. Unless something of the kind is adopted, I think the progress of the business will meet with considerable delay, perhaps it may miscarry altogether. Few states, I apprehend, will be willing to incur a load of debt, for which there is not a pressing necessity, and rely upon the final settlement of accounts to obtain redress: Nay, the gentleman from Massachusetts, (Mr. Gerry) who is now so arduous in pressing the business, urged, the other day, some strong arguments against extending indulgence to delinquent states, at the expence of the states which had complied with the requisitions of the late congress; if it was improper to allow a state to take advantage of its delinquency in neglecting to pay its quota of indents, surely it is as improper to permit them to benefit by neglecting the proper exertions to pay their debts: Upon the whole, I conclude, the amendment would tend to equalize the burthen, and by making it more acceptable to our constituents, the good would counterbalance the evil.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 88–89 (also reported briefly in N.Y. Daily Gazette, 4 Mar. 1790).

[1 March 1790]

   Laurance opposed JM’s amendment.

Mr. Madison. The gentleman from New-York seems to suppose that the assumption of that part of the state debts, which has been redeemed since the peace, will impede the final settlement of the accounts; because it will diminish the desire of some states to bring that measure to a conclusion: Does then the ultimate settlement of the accounts depend on the disposition of particular states? If it does, there arises a necessity of assuming the whole, instead of a part only of these debts; because, if justice is never to be done, the inequality ought to be diminished as much as possible. If the settlement does not depend on any contingency, but will, as he has said, be accomplished in two years, there can be no necessity of adopting either the original proposition or amendment; because it is not contemplated to make provision for the payment of the state debts, until April 1792: The period by which it will be known, whether any thing, and what is due to each state respectively.
I am afraid, I confess, that notwithstanding every step which may be taken, there will be unforeseen difficulties in the final liquidation and adjustment of the accounts; and I am persuaded, if that measure should miscarry, the assumption of the existing state debts will work, indeed, an enormous injustice: If we can reduce that event to a moral certainty, and be sure that it will speedily take place, we may delay the assumption, with great propriety, until its accomplishment.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 91.

[1 March 1790]

   Ames continued to raise objections to JM’s amendment.

Mr. Madison. The gentleman from Massachusetts thinks my principle would go to cover all the debts contracted during the war: I ask, what is the intention of the gentlemen in favor of the assumption? What are their arguments? Do they not all go to such an assumption? And if we make such assumption, will any gentlemen contend that we ought to assume only the unpaid debts? Why shall we not assume the paid also? Has there been an argument adduced which favors the distinction?
With respect to refunding what a state has advanced, I have to remark, that refunding must any how take place, if Massachusetts and South-Carolina shall be found debtor states, which will undoubtedly be the case, when we consider the sums to be assumed on their account, they must eventually refund what is now advanced them: If there must be a refunding by some state, that objection will go for nothing.

   Cong. RegisterThomas Lloyd, comp., The Congressional
          Register; or, History of the Proceedings and Debates of the First House of
          Representatives … (4 vols.; New York, 1789–90; Evans 22203–4, 22973–4)., IV, 92–93.


Title: From James Madison to Henry Lee, 1 March 1790
From: Madison, James
To: Lee, Henry

Letter not found. 1 March 1790. Acknowledged in Lee to JM, 13 Mar. 1790. Probably relates to the defeat of JM’s discrimination amendment, the assumption debate, and Lee’s Potomac land speculation.


Title: To James Madison from Edward Carrington, 2 March 1790
From: Carrington, Edward
To: Madison, James

My dr sir,
Richmond March. 2. 1790
Upon coming to Town a few days ago I had the pleasure to receive yrs. of the 2d. & 14th. Ult. From Colo. Innes I have also had the perusal of the reports of the Secretaries of the Treasury and War departments. I have not as yet been able to give either so thorough an examination as to enable me to give a decided opinion upon it—the former indeed is extensive and complicated; it also takes up many principles which are new to the Finances of this Country. Upon the slight view I have however been able to take of it, it appears well calculated to place the public Credit on a permanent and good footing. The Tax proposed on Country Stills would at first seem to have an unpopular cast, but when it is considered with those laid on Spirits distilled from foreign productions, and those on imported Spirits, it is certainly calculated to give a decided advantage to the country stills. Indeed ardent spirits are so pernicious that they ought to be highly Taxed even where they are distilled from our own produce. As to the plan for a National Militia it may be unfortunate that none can be adopted promising great advantage without an expence that will be thought too expensive by the people—we have only to weigh this agt. the benefits of a certain and firm defence on which we rely without that more expensive and odious one depending on standing Armies.
I am much obliged by your communication upon the subject of your Motion, the mode of treating the public Dt. is a point upon which there are various opinions, & I shall give you mine with candour. I own I cannot see the justice or good policy of a discrimination of any kind. It was known when the paper issued that the finances of the United States, would not admit of a Compliance such as the face of the paper held out, yet the original Creditors would insist on the issues—this was the case with the Army rather in a Mutinous manner—since this the paper has been a subject of speculation, at prices which were governed by the confidence or difidence of the sellers & purchasers in a faithful redemption, and the latter have demanded a premium for their hazards. Any Measure of the sort must necessar[il]y injure the public credit which with me is the most important consideration of all. After one instance of a discrimination, since you are still to give out paper, is it to be expected, that a depretiation will not take place upon an apprehension that the same thing will be done again? Should it be said that adequate funds will now be provided, to this it may be answered that the descerning will perhaps be able to judge of the consequences of such a circumstance, but the ignorant will not—they will judge from former events, and will be as much speculated upon as ever. Your plan of an Ultimate payment of the difference to the original sufferers, in my mind presents very great mischeif to the community—it may be supposed that my partialities for that class of Creditors who were of the Army is great, as indeed it really is, but yet I know them, and I will undertake to say that had they been paid off in Gold & Silver, they would, with a few exceptions, have parted with it with as little benefit to themselves as they did the paper—they have from necessity now betaken themselves to useful employments—let it once be announced that a resettlement is to be had with them. They will quit these employments in quest of it, they will for a while be lost, as to any good purposes to the community, and will at length get as little for the second issues of paper as they did for the first. These considerations I give you as they occur—they are however inferior ones when compared with that of the public credit. I never held any of this paper except what the public issued to me, and a remittance that I received in them in place of Bills of exchange when I was in New York—the former I sold to the public at about 2/6 in the pound for Western Lands—the latter I sold immediately on their coming up, for about what they cost.
I have but an imperfect idea of the plan for the enumeration of the people. It may however be made very practicable in other States & yet be otherwise in this—where the State officers can be employed as assistants they will be able to do it for much less than those who are to be employed for this purpose alone—our Comrs. of the Taxes could have done this business better than any others from their acquaintance with the families in the course of their other duty—a Law of this State however prohibits their being set about it. Add to these considerations that Virginia comprehends vast Tracts of Country amongst the mountains even over the Allegany, which are rough and but thinly settled. I am my dr sir with sincere regard yr Affe. Hl St.
Ed Carrington