PUBLIC DEBT.

Public Debt.

[Communicated to the House of Representatives, Janu

ary 4, and February 3, 1796.] TREASURY DEPARTMENT, Dec. 31, 1795. SIR: Agreeably to what was proposed by the committee of the House of Representatives at the conference with them on the 26th instant, I have now the honor to present a statement of the debts of the United States, with a view of the sums which will be annually requisite for discharging

them.

It is proper, however, to observe that, by a law passed on the 2d of January, 1795, the balances due to States are, on certain conditions, not now 1st. Of the debts due in Amsterdam and Ant-controllable by the United States, subject to be werp, for loans obtained under the late and pre-transferred at any time before the 2d of January 1797, and that said balances, when so transferred, are subject to reimbursement.

sent Governments.

The amount of these loans, exclusive of certain premiums with which one of them is charged, amounted, on the 1st of January, 1795, to thirty millions and five hundred thousand guilders, equal, at the exchange of forty cents per guilder, to $12,200,000.

As the redeeming annuity is therefore unsusceptible of calculation at present, and may, with the interest, amount to $2,321,525 25, this last sum is assumed, in the general statement which is annexed, as the annual charge upon the re

venue.

The annexed statement, marked A, shows, in detail, the several loans which constitute this deThe annuity will be necessary for the object scription of debt, the rates of interest payable before stated until the end of the year 1817. Duthereon, and the sums which, according to exist-ring the year 1818, it will decline to $1,862,501 63, ing contracts, are reimbursable in each year. It and will then be liberated by the extinguishment is to be observed, however, that the sums stated in dollars are calculated at par, or forty cents per guilder; the sums which may be really necessary to effect reimbursements cannot be ascertained, and will vary, from time to time, according to the course of exchange.

2d. Of the Domestic Funded Debt, bearing a present interest of six per centum per annum.

This debt, on the 31st of December, 1794, amounted to $29,046,730 62, but by subscriptions under the supplementary funding act, passed on the 28th of January, 1795, it had increased, on the 30th of September, 1795, to $29,310,856 86.

In this last capital is included the sum of $1,167,164 58, which has been purchased or redeemed; the interest of which is vested in the Commissioners of the Sinking Fund; also the stock created by funding the balances due to certain States, in consequence of the report of the late Board of Commissioners in their favor; which balances originally amounted to $2,345,056. By the act of the last session, providing for the redemption of the Public Debt, the Commissioners of the Sinking Fund are instructed to commence the reimbursement of the six per cent. stock, bearing a present interest on the first of January ensuing, and to continue the same annually, until the said stock is fully redeemed. The sum placed to the credit of the Sinking Fund, and the balances standing to the credit of certain States, in consequence of the report of the Commissioners in their favor, are, however, excepted by the law from reimbursement.

The annexed statement, marked B, shows the annuity necessary to complete the payment of the stock subscribed on the 30th of September; other subscriptions, though not to any great amount, have been, and will continue to be made until the close of the present year.

of the debt:

3d. Of the Funded Domestic Debt, bearing interest of six per centum per annum, after the year

1800.

This debt, on the 31st of December, 1794, amounted to $14,523,365 45; but on the 30th of September, 1795, it had increased by additional subscriptions to $14,561,934 41.

In the capital last mentioned is included the sum of $929,220 14, which has been placed to the credit of the Sinking Fund, and a sum of $1,172,525, arising from balances due to certain States, in consequence of the report of the late Board of Commissioners in their favor.

The interest on this debt will commence on the 1st of January, 1801; the first reimbursement of principal is to be made on the 1st of January, 1802; the credit to the Sinking Fund, and the balances due to certain States, which may remain untransferred, are not subject to reimbursement. The interest and redeeming annu

ity, exclusive of the balances
originally funded in favor of
certain States, will require
And to redeem the balances origi-
nally credited to certain States,
the further annuity of

Amounting to

$1,122,919 78

23,450 56 1,146,370 34

It being very uncertain whether any part of the balances due to States will remain untransferred till the year 1802, and there being important rea sons in favor of a reimbursement of the whole debt on uniform principles, the sum last stated is assumed as what will probably be the annual charge upon the revenue.

This annuity will continue from the year 1801

Public Debt.

On the principles which have governed former appropriations, there would be necessary, until The sum purchased or redeemed, and passed to and including the year 1800, the sum of $51,333 22, the credit of the Sinking Fund, was $607,097 27. and after the year 1800, the sum of $71,029 44. Notwithstanding this debt is redeemable at the As, however, the amount of the Unfunded pleasure of the United States, and though funds Debt is uncertain, and as no principles of the reare, by the act of March 3d, 1795, eventually des-imbursement thereof have been established, the tined for that purpose, yet, as the appropriation is sum last stated is assumed as the annual charge conditional and revokable by Congress, nothing proper to be estimated for this object. more is stated as a charge upon the revenue than the annual interest, being $587,097 28.

Public Debt.

At the close of the year 1818, the Funded Domestic Debt, bearing a present interest of six per cent., would be discharged. This debt amounts to $29,310,856 86, the annuity then liberated would be $2,321,525 25.

At the close of the year 1824, the funded six per cent. stock, bearing a future interest, amounting to $14,561,934 41, would also be reimbursed, when a further annuity of $1,146,370 34 would

be liberated.

The act of the last session provides fully for the fulfilment of the two last mentioned objects, by an absolute appropriation of revenue.

After the reimbursement before mentioned, there would still remain the following sums of the existing debt:

The stock bearing 3 per cent. interest, being

The stock bearing 5 per cent. in

$19,569,909 63

1,848,900 00
176,000 00

cient for the employment of any revenues which can readily be acquired. It will also appear, from the table marked D, that such an arrangement would leave it in the power of the United States to reimburse the proposed new stock at a favorable period, by the application of revenue which will then be liberated, in consequence of the final reimbursement of the six per cent. stock, bearing a present interest.

The utility of the proposed measure can, I presume, receive but little illustration beyond that afforded by a naked exhibition of the public engagements.

It is, indeed, very probable that the final payment of the Public Debt, instead of being postponed by any existing stipulations which forbid reimbursements, will, in fact, be rendered additionally burdensome, if it be not somewhat retarded by those conditions which require repayments at fixed periods.

The difficulties which are now experienced in respect to the Foreign Debt effectually demonstrate the impolicy of unnecessarily contracting engagements which cannot be satisfied directly 1,382,837 37 from the proceeds of the revenue. At no time will those who negotiate loans for the public be able to calculate the value of money or the proba bility of an increase or reduction of the rate of interest, with greater precision than those who lend. At all times must the borrower be exposed to certain expenses, risks, and embarrassments, for which no equivalent can be obtained.

6,200,000 00

29,177,647 00

But if a revenue were to be established equal to what will be requisite to satisfy the public engagements upon the scale of expenditure which will be necessary in the year 1801, the whole of the Public Debt might be extinguished, by payment or purchase, at or before the close of the year 1824, as also a very considerable additional debt, if any such should arise, out of future contingencies.

This view of the public engagements will, it is presumed, demonstrate to the committee that, in the arrangements which have been hitherto made, an attention has not been wanting to secure a right of reimbursing the debt, fully, if not more than equal, to what the United States can exercise, and that the unforeseen events which have lately happened in Europe render it necessary to combine some efficacious plan for obtaining loans, with any augmentation of the revenue which it may now be judged expedient to establish.

Among the reasons which recommend a commutation of the temporary debt due to the Bank of the United States, the following deserve notice:

1st. That this debt was contracted for the very beneficial consideration of an equal sum of the capital stock of that institution, or, it consists of sums advanced for the public service in anticipation of the revenue. In these respects, the debts due to the bank may be fairly considered as first in merit and importance.

2d. That the proposed commutation will enable the bank to grant such further loans as the public exigencies may require, without exposing the United States to certain expenses which are always incident to loans had of individuals.

3d. That, through the agency of the bank, sales of stock can be made to the best possible advantage, and the benefit of any premium which can be obtained be secured to the United States.

After a full consideration of different expeThis last consideration is of much importance; dients, it has appeared to me most eligible to pro- for, though the proposed stock might not, in the pose a commutation of the whole debt due to the present moment of commercial enterprise, comBank of the United States into a funded domes-mand a premium, yet there can be but little tic stock, bearing interest at six per centum per annum, transferable at the Treasury and Loan Offices, respectively, and irredeemable for such a period as will invite purchases at par.

Considering the great capitals which will soon be demandable, or which are in train of reimbursement in consequence of the act of the last session, it is evident that, if the proposed new stock were to be declared irredeemable for a period of twenty or twenty-five years, still the purchase or redemption of the remaining debt would be suffi

doubt that it would bear a price considerably above par at no distant period. While, therefore, any present exigencies would be supplied on the most favorable terms, a certainty would remain that the real value of the stock would accrue to the public. I have the honor to be, &c.,

OLIVER WOLCOTT, Jr., Secretary of the Treasury. To the Hon. WILLIAM SMITH, Esq.

[The tables, being merely details, are omitted.]

TREASURY DEPARTMENT, Jan. 26, 1796. SIR: The object of this communication is to represent to the Committee of Ways and Means that certain additional provisions appear to be advisable, in order to a due execution of the act, passed during the last session of Congress, entitled "An act making further provision for the support of Public Credit, and for the redemption

of the Public Debt."

The eleventh section of the recited act directs, that the Commissioners of the Sinking Fund shall cause to be paid, yearly, such sums as, according to the right for that purpose reserved, may rightfully be paid for and towards the reimbursement or redemption of the debt or stock, bearing or to bear an interest of six per centum per annum. In respect to the stock bearing a present interest, it was directed that the reimbursement should commence on the first day of January, 1796. Upon the stock which will bear interest after the year 1800, the reimbursement is to continue on the first day of January, 1802.

ratio, proportioned to the reduction of capital by reimbursement; while the dividends to be made at the end of the year, for principal and interest, are represented as increasing by the amount of liberated interest; the dividends for the entire year being uniformly eight per centum upon the original capital.

Upon this statement, it may be observed, that it has been the established practice at the Treasury and Loan Offices to suspend all transfers for fourteen days preceding the expiration of each quarter; that time being found by experience to be indispensably necessary for the purposes of balancing the books, and calculating the dividends upon the stock held by individual creditors: a view of the annexed table will, however, prove that the labor of stating the dividends must be immensely increased, if a distinction between the payments on account of interest and those on account of principal is to be preserved. But the trouble and expense which would be created in the public offices would not be the only or greatest inconvenience. Such a system of reimbursement would, after a few years, render it necessary to accumulate in the Treasury, and suspend from circulation very considerable sums; the effects of such an accumulation might be inconvenient to comAs the injunctions of the law upon the Commerce, and could not be materially advantageous missioners of the Sinking Fund are unconditional, to the public. As the rates of the dividends and as permanent funds have been vested and appropriated, it is conceived that a successive reimbursement annually of the debts before mentioned, has become an irrevocable stipulation with the creditors. The stock bearing a present interest has, therefore, by the act of the last session, been converted from an annuity of six per centum per annum, for an indefinite period, into an annuity of eight per centum per annum, for a period of somewhat less than twenty-four years, commencing with the year 1795.

The sum which may rightfully be paid in one year, is eight per centum per annum upon the original capital, debt, or stock.

The stock upon which interest was to commence in 1801, is a like annuity from that period. But a stipulation in the fourth section of the act, entitled "An act making provision for the debt of the United States," requires a quarter yearly payment of interest, and this stipulation remains in force; a distribution of the annuity of eight per centum per annum into four quarter yearly dividends, is therefore necessary to satisfy the contract with the creditors.

If the dividends on the last days of March, June, and September, in each year, were to be confined to a simple payment of interest upon the unredeemed capital, the contract would be strictly satisfied; the fourth quarterly dividend, or that to be made on the last day of December annually, might, in this case, be calculated at such a rate as would complete the sum of eight per centum for each entire year; this appears to have been the design of the law in contemplating a distinction between the payments on account of principal and those on account of interest.

The effect of such a distribution of the annuity of eight per centum is exhibited in the annexed table, which shows the dividends of interest for the first three quarters of a year, in a decreasing

would

vary from year to year, the true value of the stock could only be ascertained by intricate calculations, to which many of the creditors would be incompetent. Moreover, the rates of the dividends for interest for several of the last years, would, upon small sums, be too inconsiderable to induce the creditors to a cheerful compliance with certain forms which have been established with reference to the public security, and the responsibility of the public officers. This last objection is very important; as every degree of loss and vexation to the creditors would not fail to produce a corresponding injury to the public credit.

Notwithstanding it is believed that the powers granted by the seventeenth section of the act of the last session might be justifiably construed in such a manner as would obviate some, if not all the inconveniences which have been stated, yet, in a matter of importance like the present, the decision of the Legislature is desirable. It is, therefore, proposed that the rates of the quarterly dividends, until the final reimbursement of the six per cent. stock, bearing interest at present, and after the year 1800, be now declared and established by law.

Two propositions are submitted for consideration: 1st. That, in respect to the stock bearing a present interest, it be declared, that there shall be dividends made on the last days of March, June, and September, from the present year to the year 1818, inclusive, at the rate of one and one-half per centum upon the original capital; that there be dividends made on the 1st days of December, from the present year to the year 1817 inclusive, at the rate of three and one-half per centum upon the original capital, and that a dividend be made, on the last day of December, in

Public Debt.

the year 1818, of one dollar eighty-six cents and nine mills per centum, upon the original capital, in full of said stock.

If either of these propositions shall be adopted, in respect to the stock bearing a present interest, it will be proper to establish the same rule for reimbursing the stock upon which interest will commence after the year 1800.

the stock will, therefore, be hereafter a matter of calculation, depending on the term for which the annuity of eight per centum per annum is to continue.

To guard purchasers against deception, an intimation of the arrangement which has been adopted is expressed in the certificates which have been issued since the commencement of the present year.

Or, 2d. That, in respect to said stock, bearing a present interest, the following dividends be established, namely: from the present year to the year 1806, inclusive, a dividend of one and onehalf per centum on each of the last days of March, June, and September, upon the original capital; and upon each of the last days of December, It is, however, essential to the preservation of during the said period, a dividend of three and order in the public accounts, and to the security one-half per centum upon the original capital; of negotiations of this description of stock, that from the year 1807 to the year 1818, inclusive, a all the certificates which may, at any time, be dividend of one per centum on each of the last in a course of transfer, should possess a uniform days of March, June, and September, upon the character and value. That this uniformity will original capital; from the year 1807 to the year in fact be preserved, cannot be rendered sufficient1817, inclusive, on each of the last days of Decem-ly certain, unless the whole debt is subject to a ber, a dividend of five per cent., and upon the last regular reimbursement. It is now ascertained, day of December, in the year 1818, a dividend of that a considerable portion of the balances due to three dollars thirty-six cents and nine mills per States will not be transferred within the time centum upon the original capital, in full of said limited by the act of January 2, 1795. Unless, stock. therefore, a provision is made for reimbursing these balances in their present form, one of two consequences must follow: the United States must hereafter refuse to permit transfers to be made, however pressing the emergencies of the creditor States may be; or, two new denominations of funded stock must be admitted into circulation. It is conceived that neither the magnitude of these debts, nor any objects of public utility, require that the exemption from reimbursement, contained in the act of the last session, should be continued. If, however, the proposition now made should be adopted by Congress, it will be proper that an option should be reserved to the States to receive or reject, at their pleasure, a reimbursement equivalent to that made on the residue of the six per cent. stock at the commencement of the present year. It may, however, be safely presumed that each of the creditor States will readily comply with a measure obviously tending to produce an accommodation to the Government. It is further proposed, as an amendment to the It is conceived to be a true construction of the act of the last session, that provision be made for law, that the annual reimbursement upon any reimbursing the balances, bearing and to bear in-stock, which may be in a state of transition to, terest at six per centum, due to certain States, which were funded in consequence of an act passed May 21, 1794. These balances, at present, constitute a part of the domestic funded debt, and unless they shall be reimbursed in course with the residue of said debt, it is apprehended that a degree of complexity will be introduced into the public accounts unfavorable to a regular and satisfactory administration of the business of the Treasury.

Either of the plans proposed will admit of an easy execution in the public offices, and either of them may be adopted consistently with the public engagements. The first proposition would be most favorable to an equal and regular circulation of the public revenue, and would serve to impress upon the stock the most uniform value. It is liable, however, in a greater degree than the second, to what may be deemed an objection common to both; namely, that of requiring an expenditure of money before the time actually stipulated for payment by the existing contract. The considerations of public utility, which have been stated, will however, it is presumed, more than counterbalance the objection.

In deciding on the manner of executing the law, it has been judged inexpedient to renew the certificates in consequence of the annual reimbursements. It was indeed doubted, whether the operation would be practicable; at any rate, the expense to the public, and the trouble which would be produced to the creditors, were deemed insuperable objections. Accordingly the creditors have been notified, that their certificates will not be recalled, and that transfers will be continued upon the original capital stock. The value of

or from, the Loan Offices or Treasury respectively, and on that account, not in a state to be included in a dividend at the usual period, may be lawfully made at the end of the ensuing quarter, at the office where the stock may then remain.

This construction is necessary to a due and regular execution of the law, and is supposed not to be inconsistent with the limitation which for bids the reimbursement of a greater sum than eight per centum on account of principal and interest in one year. It would be unreasonable if an act of the creditor were to be construed to preclude the right of the public to discharge the annuity at the regular period. If, however, any doubt should exist as to the powers of the Treasury upon this point, a Legislative explanation will be advisable.

The trusts vested in the Commissioners of the Sinking Fund, in respect to the reimbursement of the Public Debt, and for other purposes, are, at present, of high responsibility and importance, and