average of the eight succeeding years, an annual sum of $ 400,000, must be annually applied to the payment or purchase of any part of the public debt, excepting only the eight per cent. loans and navy six per cent. stocks, neither of which existed at the time of passing, or is embraced by the provisions of the law of 3d March, 1795: and, under present circumstances, these proceeds will naturally be applied to the reimbursement of the Dutch debt, so far as they can operate towards that object; but, as the instalments due on that debt amount annually for this and the five ensuing years, to a sum which varies from $920,000 to 2,220,000, and which averages, for each of the said six years, almost $1,600.000 a year, it is evident that that appropriation is inadequate for that object.

From thence it results that, for the faithful discharge of about three-fourths of the Dutch debt, no other provision is made, exclusively of the authorities to borrow or to sell bank shares, except that which may result from the surplusses of revenue, or from the additional duties laid by the act of 3d March, 1797; that no provision, until the Dutch debt shall have been discharged, nor, after its payment, any other but the above-mentioned proceeds of lands and old debts, is made for the purchase and redemption of any other of the debts existing on the 3d March, 1795, or embraced by its provisions, (and which consist of the five and half, four and half, three, and 1796 six per cent. stocks) except the above-mentioned surplusses of revenue; and that, for the redemption of the two eight per cent. loans, and navy six per cent. stocks, no efficient provision has been made; the general appropriation of the acts authorizing the two eight per cent. loans, being discretionary and not imperative; and that of the act of the 13th May, 1800, being rendered nugatory so far as relates to the principal, by being applicable to the payment of any part of the interest of the public debt.

3d. The amount of the sums which, by virtue of the appropriation of the surplusses of revenue, should vest in the Commissioners of the Sinking Fund, has never yet been ascertained; and several difficulties occur in attempting to determine the true construction of the law, by which to fix that amount. It is uncertain whether, by the law of the 3d March, 1795, the surplusses of the years preceding that year are vested; whether it was intended, by that law, to vest in the sinking fund the surplus of each calendar year, in which such surplus did exist, without making any deduction for the years where the appropriations exceeded the revenue, or, only the real aggregate amount of surplusses, deducting the deficiencies for those years, from the surplusses of revenue for the years where the same did exist; whether the proceeds of loans should be included in the revenue; and whether the payments on account of the principal of the debt should be charged to that revenue. It does not appear that an uniform construction has prevailed in this department in relation to the two last points. Taking, however, the accounts as they now stand on the Treasury books, and which, until a minute investigation shall have taken place, are the only evidences of those surplusses, it ap7th CoN. 2d SES.-40

pears by the statement A, hereunto annexed, that, instead of a surplus, those books exhibit a deficiency of $930.128 64 on the aggregate revenue, from the establishment of the present Government to the close of the year 1790, resulting from the appropriations charged to the revenue, having, during that period, exceeded, by that sum, the total amount of revenue, whether collected or outstanding, as it stands entered on those books. From that very result, I am strongly inclined to suspect that some entries have been made or omitted, on erroneous principles; but, it is not less evident that, for the present, this appropriation of surplusses cannot be resorted to, in order to cover the deficiency stated in the preceding item.

4th. The proceeds of the additional duties laid March, 1797, the only remaining resource for that object, not only are not by law vested in the Sinking Fund, but no steps whatever have yet been taken to ascertain their annual amount; and, although it may be practicable, hereafter, to do it, so far as they consist of specific duties, the amount of that part which consists of a two and a half per cent. additional duty on certain cotton goods, specified in the law, could not. without a total alteration in the manner in which duties are ascertained, by the officers of customs, be distinguished from the proceeds of the duties on other goods paying the same rate of duty ad valorem. The total amount, however, even if it could be ascertained, cannot be estimated at a greater annual sum than $500,000, and this, added to the proceeds of lands and old debts, would fall far short of the sum annually wanted to pay the instalments of the Dutch debt. Those instalments have, heretofore, been paid out of the duties on tonnage and merchandise, generally, and charged to the revenue of the year in which they were paid, without paying any attention to the complex and inefficient provision made by law. It does not require any comment to prove, that provisions which leave no option between an irregular and unauthorized mode of payment, and a failure in the public engagements, are eminently defective.

The appropriations made subsequent to the 3d of March, 1795, which are not vested in the Commissioners of the Sinking Fund, are also liable to the general objection, that, for want of that investiture, and not being made in the nature of a contract with the creditors, they are not permanently inviolable, but like any other ordinary law, may, without any breach of faith, be repealed at the will of the Legislature, and afford, therefore, no security for the eventual discharge of the debt. The appropriation of the surplusses of the revenue, though vested in the Commissioners of the Sinking Fund, is substantially liable to the same objection: for, as only the surplus of revenue, beyond all the appropriations charged to the same, is applicable to the payment of the debt, nothing more is necessary to defeat that provision, than large appropriations for other objects.

Not only are those provisions for the public debt difficult to be executed, uncertain in their amount, dependent on the will of the Legislature, and, at all events, inadequate to the object; but, it is ul

timately a matter of discretion with the Secretary of the Treasury, to carry them into effect, even in the case of surplusses ascertained and vested in the Sinking Fund.

All payments must be made out of moneys in the Treasury. An appropriation authorizing and directing the annual payment of a certain sum, as in the case of the eight per cent. annuity, on the six per cent. and deferred stocks, must be satisfied each year out of those moneys. An appropriation, designating, for a certain object, all moneys arising from a certain source, as in the case of the proceeds of the Western lands, and of old debts, is equally efficient, as those moneys cannot be applied to any other object. But the other appropriations for the redemption of the public debt, are neither accompanied with an imperative clause directing their application, nor, the 1797 additional duties excepted, bottomed on a distinct source of revenue, solely applicable to that object; and they rest, in common with all the appropriations for the civil, military, and naval expenses of Government, partly on moneys in the Treasury, and principally on the outstanding uncollected revenue. The aggregate of all these several kinds of appropriations uniformly exceeds the moneys in the Treasury, and it remains always optional with the Secretary of the Treasury which of them he will satisfy; and where the law does not direct, in express terms, the payment of a debt, it is left to his discretion whether he shall pay it or not. The object of the law of the 2d March, 1769, seems to have been to make an efficient provision for the gradual reimbursement of the six per cent. and deferred stocks, by payment of eight per cent. a year, and to pave the way for a future, though distant payment of the foreign debt, by giving to the sinking fund the unascertained resources which might be derived from the sales of lands, and from the surplusses of revenue, and after the respective redemption of the six per cent. and deferred stocks, in 1818 and 1824, a sum equal to the interest accruing on the debt thus redeemed.

This last fund being too distant, and the other too uncertain, to rest, upon either, the payment of the foreign debt, the same act contemplated either its conversion into a domestic debt, redeemable at will, but not demandable at certain fixed periods, or its redemption by the proceeds of the sales of a stock of the same nature It might have been unsafe at that time, and in the then existing situation of the revenue, to have attempted more. But although the proposition for thus converting the foreign debt, was accepted for that portion which remained due to the Government of France, and two millions of dollars in a domestic five and half and four and half per cent. stock, which remains unredeemed, were thus substituted to an equal amount of foreign debt, the plan was rejected by the Dutch creditors; and from recent information obtained in that quarter, no expectation remains of its being accepted under any modification whatever. The appropriations made since 1795, instead of being, by an investiture in the sinking fund, engrafted on the plan then commenced, have been made in a detached and unconnected manner,

have proven altogether inefficient, and do not seem to have produced any other effect, than that of rendering still more complex, a system in its nature sufficiently intricate. The heavy instalments of the Dutch debt are, in the meanwhile, becoming due, and require an immediate and efficient provision: the exorbitant interest paid on the eight per cent. loans, both of which are irredeemable till the year 1809, renders it necessary that such measures should be adopted as may at least insure the certainty of their reimbursement, as soon as, by their terms, Government may do it; and both with a view to that object, and on account of their being at all times demandable, it is of importance that the temporary loans obtained from the Bank of the United States should be discharged as soon as the situation of the Treasury will permit it. Nothing more seems necessary for those several objects than to make for the debts, which are intended to be discharged, as adequate a provision as is made by the act of 3d March, 1795, for the payment of the eight per cent. annuity on the six per cent. and deferred stocks; by vesting in the Commissioners of the Sinking Fund, in addition to the other funds already vested in them, such annual sum, to be out of the duties on tonnage and merchandise, as will be equal to the proposed redemption, and by directing the Commissioners to apply the same to the redemption of such debts. This provision will be determinate in its amount, simple in its execution, certain in its effect; it will neither derange nor alter a single existing appropriation or payment in relation to the sinking fund, for which the public faith is pledged, but will leave to all the other uncertain funds of that fund, and especially to the surplusses of the revenue, their legitimate operation.

The annual sum of $7,300,000 was designated in the report made by this department to Congress, at the commencement of this session, as ap plicable to the payment of both principal and interest of the public debt. The interest and the eight per cent. annuity on the six per cent. and deferred stocks, amount, for the present year, to $5,228.000; which would leave something less than $2,100,000 applicable to the redemption of the principal of all the other debts. Of this sum it may be estimated that about $900,000 are produced by the proceeds of lands, and of the additional duties of 1797. The actual additional appropria tion, on the principles of that report, would not exceed $1,800,000.

In proposing that sum, I was guided, not by any abstract or arbitrary principles, but by the amour: which was actually wanted during the present and the two ensuing years, in order to meet the payments on account of the Dutch debt. It is necessary, for those three years, to provide to tha amount; and as, in the ordinary course of things the receipts in the Treasury must be effected by recent events, to a much greater extent during the two ensuing years than afterwards, it appeared that, if it was intended to make an impression on the debt, no reason could be alleged why the provision necessary for these two arduous years should not be extended to the full redemption of

the whole debt, or at least to the reimbursement of every part which was not effectually provided for by the law of the 3d of March, 1795. The ability of the United States, with their present revenues, to apply annually that sum to that object, rests on the correctness of the estimates annexed to the report. These will not be affected by the repeal of the internal taxes, provided that the retrenchments made in the expenditure shall have been equal to the annual sum of $650,000, for which credit was taken in the estimate of revenue on account of those taxes. But in order to run no risk on that ground, I would suggest the propriety of a modification in the manner of making the appropriation, which will effectually guard us, should the annual amount of the net receipts in the Treasury be more affected by the restoration of peace than has been expected.

It will be recollected that, on the principles of that report, provision was made, independent of the permanent revenues, to meet the probable demands which might arise under the convention with France, or the sixth article of the treaty with Great Britain. The resources, estimated at three millions of dollars, which were suggested as sufficient, for the present, to discharge those eventual demands, were the surplus of specie in the Treasury, an eventual sale of the bank shares belonging to the United States, the arrearages of the direct tax, and the proceeds of duties on the stamps. The deficiency arising from the repeal of those duties will be more than balanced by the arrears which shall remain outstanding on the internal duties, on the 30th day of June, and which will not fall short of one million of dollars; and the amount of specie in the Treasury was greater by $500,000, on the first day of January last, than had been estimated: for, it is proper here to state that that specie which, on the first day of April, 1801, amounted only to $1,794,044 85, had increased, on the 31st December last, to the sum of $3,089,761 78.

Those estimated three millions may therefore be safely relied on in addition to the permanent revenues; and the modification which I would suggest, consists in making the payment of the eventual demands which may become due to foreign nations, conditionally payable out of the proposed appropriation of $7,300,000 for the debt, with a proviso that both those demands, and the temporary loans, might be paid out of other moneys, if the situation of the Treasury should permit it. The effect of this modification would be, eventually, to draw the three millions reserved, to assist the current revenues, if these should fall short of the estimates.

If the receipts of the Treasury should be equal to the sums at which they have been rated, the effect of the appropriation would be precisely that exhibited in the report, namely, that it would be applied to the payment of the public debt, including therein the loans obtained from the bank; and that the demands which may become payable to foreign nations would be discharged out of the reserved three millions. If those receipts should fall short of the estimated sum, the appropriation

of $7,300,000 would be applicable both to the payment of the debt, and temporary loans, and of the demands arising under treaties.

If the revenues should exceed the sum at which they have been rated, the $7,300,000 would be applied exclusively to the payment of the debt proper; and both the temporary loans and demands payable to foreign nations, might be discharged out of the surplus moneys thus received in the Treasury. By adopting that mode, we would be safe under every ordinary contingency; the only difference which would result from a greater or less revenue than has been estimated, being, that the ultimate redemption of the debt would be accelerated or retarded in the same proportion.

Having answered the inquiry proposed in your letter with as much precision as the subject seems to admit, permit me to suggest some other arrangements, which, though of less magnitude, are not altogether unimportant.

The inconvenience of paying the large instalments of the Dutch debt, which fall due this and the ensuing years, is much increased by the obligation of discharging them abroad, both on account of the injury arising from such considerable portion of the circulating capital of the United States being thus drawn abroad, and of the difficulty and risk which attach to the purchase of so large an amount of remittances. Although those difficulties must be met, if they cannot be obviated. it seems proper to adopt every measure which may diminish them. The plan contemplated by the act of the 3d March, 1795, of converting that debt into a domestic debt, has heretofore been found impracticable, and, from the latest advices, the event of peace absolutely precludes any expectation of its being carried into effect. It is, however, possible, though very doubtful, that the terms of payment of a part of that debt may be extended by reloans, so as to equalize, on the eight ensuing years, the payments which fall principally on this and the four succeeding years. Should that operation be effected so as to reduce the annual payments in Holland from two millions of dollars to one million, the other million might be applied with more advantage in the payment of the loan obtained from the bank, or of any other part of the debt payable and held in America. For this purpose it would be necessary to give an express authority to the Commissioners of the Sinking Fund, and, in order to enble them to transact, in the most advantageous manner, both that and every other business relative to that debt, it would be eligible to give them a power, if they shall find it necessary, to employ a special agent in Holland. The usefulness of that arrangement had been some years ago suggested by this department, and its necessity is now much increased by the increased extent of the payments and transactions in Holland thereto.

The difficulty and risks attaching to the purchases of remittances, which can only be obtained at a distance from the Treasury Department, and without any immediate control of any officer of the Government, may not perhaps be obviated by

any means. If it shall be found practicable to treat for that object with one of the banks, making a fixed allowance for every uncertain variation in the rate of exchange, and loss in the purchase of bills, it will be considered a beneficial operation to the United States. But although this may be considered as fairly within the power

of the Commissioners of the Sinking Fund. it would be desirable to obtain a previous express authorization from Congress.

I have the honor to be, respectfully, sir, your obedient servant, ALBERT GALLATIN. Hon JOHN RANDOLPH, Jr.,

Chairman of Committee of Ways and Means.