752 



REFUNDING THE NATIONAL DEBT. 



that organization felt severely its lack of 

 power to levy taxes for the support of the 

 General Government. The Congress of the 

 Confederation on the 18th of April, 1783, ur- 

 gently recommended to the States the estab- 

 lishment of permanent funds for the liquida- 

 tion of its debt, or, at least, for the payment 

 of the interest thereon. The scheme recom- 

 mended was that of clothing "the United 

 States in Congress assembled " with power to 

 levy duties on imported goods, but it was not 

 adopted by the States so as to make it opera- 

 tive. Recourse was then had to requisitions 

 on the States, but, no response being made 

 thereto, both the principal and interest of the 

 debt were left wholly unprovided for. 



The debt outstanding in 1789 was made 

 up of foreign and domestic loans contracted 

 under the Confederation, and of the debts of 

 the several States incurred in their individual 

 capacities, on all of which large arrearages of 

 interest had accrued. The unpaid foreign debt 

 contracted by the Confederation consisted of 

 the following loans (all at 5 per cent, except the 

 Freneh loan of 1779, which was at 4) : 



French loan of 1776 $153,688 89 



" " of!777 8,267.00000 



" " of 1779 1,816,00000 



" " of!782 1,089,00000 



Spanish loan of 1781 1 74,017 18 



Holland loan of 1782 2,000,000 00 



" " of!784 800,00000 



" of!787 400,00000 



" u of!788 400,00000 



Total principal $10,098,706 02 



On this there were due arrearages of Interest to 

 January 1, 1790, amounting to 1,760,277 58 



Making a total foreign debt at that date of $11,858,983 60 

 There was also a debt due foreign officers who 

 had served in the war of the Revolution, for 

 which certificates had been issued amount- 

 Ing to 186,988 78 



On these latter there were arrearges of interest 

 to January, 1790, amounting to 11,219 82 



In all $198,20810 



The estimated principal of the domestic debt at 

 that time amounted to $28,858,180 65 



On this the arrearages of interest amounted, as 

 nearly as can be estimated, to 1 1,898,621 80 



Total domestic debt $40,256,802 45 



There were also several arrears and claims 

 against the late Government, outstanding and 

 subsequently discharged, amounting to $450,395 52 



All these different sums made the entire debt 

 of the United States on January 1, 1790. . . . $52,764,389 67 



In addition to this debt there were the indi- 

 vidual debts of the several States, which had 

 been incurred in the common defense of the 

 country, the precise amount and character of 

 which could not be then ascertained. It was 

 estimated by Hamilton at that time to be in 

 the aggregate about $25,000,000. 



On the 21st of September, 1789, the House 

 of Representatives resolved as follows : " That 

 the House considers an adequate provision for 

 the support of the public credit as a matter of 

 high importance to the national honor and pros- 

 perity." The Secretary of the Treasury was 

 accordingly directed to prepare a plan for such 



provision and report it to the House at the next 

 session. In obedience to the resolution, on the 

 9th of January, 1790, Alexander Hamilton, then 

 Secretary of the Treasury, transmitted to the 

 House the first of his famous reports on the 

 public credit, in which he recommended that 

 the entire indebtedness, both State and general, 

 be consolidated into a new loan of such char- 

 acter and upon such conditions as would main- 

 tain unquestioned the good faith of the nation, 

 and make no change in the rights of the cred- 

 itors without their consent. The adoption of 

 the new Constitution, coupled with the belief 

 at home and abroad that some satisfactory pro- 

 vision would be made for the several debts, had 

 already caused a great advance in their mar- 

 ket value, to the advantage of the holders, many 

 of whom had paid therefor a less sum than the 

 arrearages of interest amounted to. Notwith- 

 standing this advance in value, there was but lit- 

 tle opposition to providing for the domestic debt, 

 and there had been none to paying the foreign ; 

 but the proposed assumption by the Union of 

 the State debts met with bitter criticism and 

 created much angry feeling, as some of the 

 States were largely indebted to the General 

 Government, while others had balances due 

 therefrom, and no plan was proposed for an 

 equitable adjustment of these differences. The 

 recommendations of the Secretary, though once 

 rejected by the House, were finally adopted, 

 and were embodied in the act approved Au- 

 gust 4, 1790, which provided for the refund- 

 ing of the debts in the following manner : 



For the payment of th foreign debt and 

 the interest thereon, the President was au- 

 thorized to borrow a sum not exceeding $12,- 

 000,000, the right to reimburse the amount 

 within fifteen years being reserved ; and under 

 this authority the following loans were issued: 



Loan of 1790, Holland $1,200,000 



of March, 1791, Holland 1.000,000 



of September, 1791, Holland 2,400,000 



of November, 1791, Antwerp 820,000 



of December, 1791, Holland 1,200,000 



of August, 1793, Holland 1,180,000 



of 1793, Holland 400,000 



of 1794, Holland 1,200,000 



Total $9,400,000 



These loans bore interest at various rates, 

 some 4, some 4$, and some 5 per cent., and 

 were made payable by installments in from ten 

 to fifteen years from the date of their issue. 

 The net rates realized on them varied from 94 

 to 96$ per cent. 



For the payment of the domestic debt a loan 

 to its full amount was authorized, payable in 

 the different certificates and bills of credit 

 which had theretofore been issued by the Gen- 

 eral Government in settlement of the principal 

 and interest of the indebtedness which had 

 been incurred for the expenses of the war of in- 

 dependence. The stock issued upon this loan 

 was of three kinds : 1. Stock in an unspecified 

 amount bearing interest at 6 per cent, per an- 

 num, and subject to redemption by payments 

 not exceeding in one year, on account of prin- 



