410,562 03 897,680 12 3,092,036 79 $7,535, 151 73 (b) This is the amount due for one year; the amount actually paid at the Treasury was $2,727,959 07. The difference arises from the payment of two per cent. made on the six per cent. stock; which is not charged here as a current expenditure; it being a redemption of principal of Debt. (e) This sum is not accurate. Recapitulation of Balances. In favor of Treasury, 31st December, 1791 $87,090 72 10 2,759,282 56 $2,998,225 75 $1,517,650 00 $2,998,225 75 $957,770 65 282,012 73 29,338 22 2,761,392 06 1,402,251 63 $4,161,534 19 This amount had been expended beyond the moneys actually received into the Treasury which arose from our own resources. It had been supplied by Domestic and Foreign Loans, and was an increase of debt. Whatever other debts might have been discharged during the same period were paid out of the proceeds of other loans; for the Committee would see that in the statement he had produced that he had accounted for the whole of the moneys paid into the Treasury other than what arose from loans. All other expenditures whatever, beyond that amount, must have proceeded from loans, and the deficiency in those moneys to meet the current expenditure was also supplied by loans, and was an increase of debt. But this was not all; he had credited the account for the sums (arising from the surplus of the revenue of 1790) applied to the Sinking Fund; for a sum of near one million of dollars applied to purchase the principal of the Domestic Debt of the United States. This might have been an advantageous operation; it had certainly the good effect to contribute to the raising the Public Stocks to their real value; but it must be considered that the reason which had enabled Government to apply any moneys to the purchase of the principal of the debt, which had produced a surplus of the revenue of 1790, was, that the interest on the Continental Debt was not paid till 1791. In the year 1790, whilst they were diminishing the principal of the debt, by purchases of about one million of dollars in specie; the interest on the principal of the Domestic Continental Debt, amounting for one year to one million eight hundred thousand dollars, did accrue, remained unpaid, was funded, and made a clear addition to the debt of three per cent. stock to that amount. The Assumed Debt afforded another item. He was not going at present to calculate the effect of that measure on the settlement of the accounts of the individual States; but merely supposing that debt to be a debt of the Union, to show its increase under the present Government. Government did not begin to pay its interest till 1792. It was difficult to determine what the interest for the two preceding years should be set down at, owing to the original principal and interest being blended in funding. He calculated the interest on twothirds of its nominal amount at nineteen millions; he called the two-thirds twelve millions. Interest on the assumed debt in 1790 and 1791, not paid but funded - $1,440,000 Part 3 part 6 per cent. and part deferred stock, which, added to the $1,800, 000 last mentioned, form a total of 3 240,000 Addition to the debt from the non-payment of in$4,161,534 19 terest in 1790 and 1791. He had not, he said, before him a correct state APRIL, 1796.] Debt due Bank of the United States. ment of the interest of the Foreign Debt for the year 1790, which was paid out of the proceeds of Foreign Loans, and not out of our domestic resources. He would estimate it at $500,000. RECAPITULATION. Excess of expenditure over receipts on One year's interest (1790) on Foreign $1,350,000 1,500,000 5,300,000 Which sum, as he meant only to give a rough sketch, and as he had neglected sundries, (such as the proceeds of the interest of the Sinking Fund,) he would call only five million of dollars. [H. OF R. On the other part of Mr. SEDGWICK's statement, he remarked, that the gentleman had first stated ten millions of dollars, in the lump, as extraordinary expenditure, he [Mr. G.] had given the Committee an account of all the expenditures, and they might judge of what were extraordinary and what ordinary. He had not himself made any such distinction, and had thought it sufficient to distinguish the expenditure of moneys applied to pay the principal of a debt from all the others. It was, to be sure, a most extraordinary method of proving that a Public Debt was decreasing, by stating that a part of the moneys expended were spent for extraordinary purposes and ought to be credited to Government, instead of constituting 900,000 an article of expenditure. The other differences between his and that gentleman's statement arose, 1st. From that gentleman having stated the nominal amount of the debt purchased, although a proportion was three per cent. and Deferred Stock; whilst he had stated the amount of moneys applied to purchase the same. 2dly. From Mr. 1,050,000 SEDGWICK having credited Government for all the purchases of Public Debt, and payment of instal500,000 ments to the Bank, (for Bank stock,) which had been made with moneys borrowed in Holland, without charging them for the moneys thus borrowed. 3dly. From his stating the bonds outstanding, and which would become due during the present and ensuing year as moneys in hand. If from the total amount credited by that gentleman to Government, viz: $10,100,000, were deAgainst this increase of debt, he remarked, that ducted the following sums, viz: the amount of the bonds due at the custom-houses Extraordinary expenses - $10,000,000 4,500,000 was set off; the amount was stated by Mr. SEDG-Out-standing bonds WICK at $4 500,000. But, he observed, this sum was Paid to the Bank (out of the proceeds of Fonot actually due, but to become due to the United reign Loans) States. Impost is a tax on consumption; upon that principle it is, that the merchant, when he Purchase of public stock lands his goods, only bonds the duties, which are out of proceeds of Foreign Loans (and excollected from the individual consumers when cess of nominal beyond they purchase the article, and repaid by the merreal value) chant after a lapse of time deemed sufficient for him to have received them from the consumer; these bonds only secure the collection of the duties when they become due. A clear proof that the amount of these bonds could not be set off against the amount of anticipations was, that it could not be applied to those anticipations. If it could be applied so, why was the proposal made which sum being subtracted from the Domestic to fund them instead of paying them? But the Loans, amounting to $6,200,000, as stated by that fact was, that those bonds constituted not the ac- gentleman, left, according to his own account, a tual revenue of the year on which they were giv-deficiency of $2,750,000, which was the same en, but the actual revenue of the year on which they were paid. The bonds outstanding on the 1st of January, 1796, constituted in part the revenues of the years 1796 and 1797, would be barely sufficient, and were altogether wanting to discharge the current expenditures of those years; and as they were no part of the receipt or actual revenues of the year 1795 and those preceding, as they could not be applied to discharge any part of the expenditures of those years or of the debt contracted to defray those expenditures, they could not be substracted from them or be set off against such debt. Amounting, altogether, to 600,000 1,550,000 Those credits would be reduced to the $16,650,000 3,450,000 amount he [Mr. G.] had stated as the excess of expenditures beyond the receipts on the 1st of January, 1796. On all the facts, therefore, they were agreed, and as to matters of opinion, the Committee might decide who were in the right. The facts agreed on were, that the excess of expenditures over the receipts amounted to about $2,800,000; that the interest had accrued unpaid during the year 1790 on the whole, and during the year 1791 on a part of the Domestic Debt, and had produced an increase of that debt; and that there were bonds outstanding to an amount of $4,500,000. Whether the debt was increased or H. OF R.J Debt due Bank of the United States. not; whether those bonds would be set off against the increase of that debt might be a matter of opinion; and, leaving that question aside, the fact was not less true that there was a debt to be provided for, (and it was the object of the bill to provide for it,) to the payment of which these bonds could not be applied. [APRIL, 1796. with the Indians had put within their reach, they might entertain well-grounded hopes of a proportionate reduction of expenditures; but be that as it might, his only object was, at all events, that means should be provided to meet the expenses of Government, and, by doing it in time, to prevent a future accumulation of debt, and to take He had already stated that the plan proposed, effectual measures for a speedy extinguishment of by filling the blank with five millions of dollars, the present one. It was with that view that he was to postpone the payment of the anticipations had entered so much at large in the history of our for twenty-three years; that his plan was to pay finances. He did not mean, in so doing, to lay them within a short time, at least not to put it any blame on the Administration. Whether they out of the power of the United States to do it were deserving praise or otherwise was not the whenever they were able. But it was said there subject of the present discussion, and he did not was no probability of their being in that situation mean to express at present any opinion thereon. for a long time, and, therefore, that no inconve- But he wished, by stating what had taken place, nience would arise from the irredeemability which and what was our present situation, to impress was to be annexed to the new stock; and the re- upon the House, so far as it was in his power to port of the Committee of Ways and Means had do so, the necessity of having virtue enough to been mentioned in support of that opinion. He discharge ourselves of the burden, and not to entail would call the attention of the House to that re- the curse of a groaning debt upon posterity. It port, in order to show that his own views were had been asserted that we were paying off our perfectly consonant to that report. The Commit- debt very fast, in order to lull us into a belief that tee of Ways and Means state, "That, in order to no harm could arise from commuting an anticidischarge the anticipations, Domestic Loans and pation into a Funded Debt, irredeemable for a Foreign Debt, it will be necessary either to pro- number of years, in order to persuade us that, notvide further revenues or obtain new loans; but withstanding that operation, notwithstanding the that, so far as relates to the additional expendi- accumulation of those anticipations, our situation ture of $1,146,370 34, which will be required after was most brilliant and advantageous. As to himthe year 1800, to discharge the annuity on the De-self, he could not see any benefit arising from such ferred Stock, an adequate additional revenue must palpable exaggerations, from so deceptive a view be provided after that year. That, if that addi- of the subject; and he had brought before the tional revenue (which it will be necessary at all Committee the result, not of his own researches, events to provide after the year 1800) be raised but of the official statements upon their table, in from and after the present year, it will not only order to prove the fallacy of the ideas which had discharge the aforesaid annuity, but will also re- so long and so often been held out on this floor imburse $4,800,000 in part of the anticipations, and to the people at large, in order to show the loans, and Foreign Debt, before the year 1801, and true cause of those anticipations, the excess of exthe whole of the Domestic Loans and anticipa- penditures over the receipts. tions before the year 1807; leaving them a redeemed annuity of $396,000, to be applied to the reimbursement of the Foreign Debt. That if an additional revenue of $2,000,000 instead of $1,200,000 be raised, for a term of twelve years, it will within that time discharge, besides the annuity on the Deferred Stock, and the Domestic Loans and anticipations, the whole of the Foreign Debt and the new Domestic Debt, bearing an interest of five and a half and four and a half per cent.; and that at the end of the said twelve years, the annuity redeemed by that operation (amounting to $1,113,930) would, together with the revenues now established, be sufficient to meet all the demands of Government." He had no desire to examine what was the object of the gentleman who differed with him in opinion on this question; but, certain he was, that the effect of their plan, if adopted, would be to perpetuate the evils which had already taken place, and to lay the foundation for a further increase of the Public Debt. The moment the principle was adopted, first to anticipate upon the revenue, to spend more than we received; and then, when those anticipations began to press upon the Government and upon the lenders to fund them, to render them irredeemable, to provide for the payment of interest only, and not of the principal; the method would appear so easy that it would un oubtedly be continued. We would anticipate again, and two or three years hence fund the amount of anticipations, in order to be able to make new ones. The increase of taxes would be so small that the people would not be alarmed, and thus we would be enabled to lavish the public money, without being checked by the difficulty of raising it. It, therefore, appeared that it was practicable to discharge those anticipations without any inconvenience; for nothing more was requisite for that purpose than to raise from next year that additional revenue of $1,200,000, which they must necessarily raise in the year 1801, in order to meet the demands of that year. Whether the revenue would be increased to that amount by raising new If such motives could influence Congress, they taxes, or by diminishing the expenditures, or by would have a far more powerful effect on the uniting both means, must depend on the future de- mind of the man who might be at the head of the cisions of Congress. From the proposed reduction financ s of this country. Whoever that man was, of the Military Establishment, which the peace I he would be desirous of having the command of APRIL, 1796.] Debt due Bank of the United States. [H. or R. large sums of money, and of increasing taxes as they could conveniently, that they wished the little as possible. The first would enable him to amount of their advances to be diminished, and, satisfy all the demands against Government, to at all events, they could not lend any more, unless spread abundance through every department'; it the former Loans were discharged. The answer would save him the irksome task of refusing mo- of the Bank he had had a few minutes, although ney, of enforcing a strict and unpleasing economy; it was not officially communicated to the Comit would acquire him the reputation of supporting mittee of Ways and Means; and as it seems it in its purity public credit and public honor; was in the possession of the gentleman of Maswhilst a careful attention not to increase the pub-sachusetts [Mr. SEDGWICK] he might read it to lic burdens would preserve his popularity and his the House if not properly stated. The Secretary power. This naturally led to the system of bor- had, in consequence of that answer, suggested the rowing, of spending the principal and of paying plan, now under consideration, to the Committee only the interest. Such had been forever the of Ways and Means in the latter end of Decemconduct of every financial Administration, in ber. Mr. G. said he entered into that detail in every country where the system had once been answer to some observations of Mr. SEDGWICK; introduced. To fund now and then a floating but he meant only to remark, that, on the part debt, navy bills, or any other description of anti- both of the Secretary and of the Bank, the principations, was the usual practice in England. The cipal object was to enable that institution to lend consequences to that country, the enormous accu- again, and Government to make new anticipamulation of debt which had taken place there, re- tions and to obtain new Loans. quired no comment. With the example of that nation, with the still more striking example of France, where accumulated anticipations, after they had so far exhausted their credit as not to be able even to fund, had first stopped, and finally overset Government itself, he thought America might well pause before they gave a sanction to the fatal principle, before they adopted the reprobated mode of exceeding their income, and of supplying the deficiency by creating an irredeemable stock. He thought it, therefore, not justifiable by any official information they had to insist as much as some gentlemen had done that the necessities of the Bank had compelled them to apply for the whole of the Debt due to them, and that it was wholly for the purpose of discharging that Debt, and because we were obliged to do it that the plan of funding the $5,000,000 was insisted upon. That the anticipations had grown up to an amount equally burdensome to Government and to the Bank he was well aware of; and he knew that it was necessary to take effectual measures to discharge them in a gradual way. But, as it was impossible to pay the whole amount during the present year without recurring to new Loans, as it was asserted that money could be obtained only by creating an irredeemable stock, and as the Bank had made no demand of the whole to the Legislature, he was against filling the blank with the five millions of dollars. Indeed he would not think it to be a friendly act in the Bank to insist upon the whole at once. The situation of the gentleman now at the head of the department was doubtless delicate and unpleasant; it was the more so when compared with that of his predecessor. Both indeed had had the same power to borrow money when necessary; but that power which was efficient in the hands of the late Secretary, and liberally enough used by him, was become useless at present. At home the anticipations and Domestic Loans had grown up till the Bank could lend no more, and in Europe the circumstances of the war had put a stop to Dutch Loans. He wished the The Bank were in the habit of lending money present Secretary to be extricated from his pre- to Government, and it had always been undersent difficulty; nothing could be more painful stood that they would continue their Loans to a than to be at the head of that department with an certain amount, and not withdraw abruptly and empty Treasury, a revenue inadequate to the ex- unexpectedly the assistance they had heretofore penses, and no means to borrow. He therefore given. He felt that that institution, not satisfied wished to provide for the exigencies of the present with lending to the United States those sums year by funding the $1,200,000, and for the re- which Government naturally expected from them. mainder of the demands against Government by on account of their relative situation, had gone increasing the revenue. Nor was be surprised that much further, had laid themselves under great the Secretary, doubting whether Congress would inconvenience; for, as their power to lend was adopt that mode, had suggested the plan now un-limited, they could not lend too much to Governder consideration. The object of that plan would appear still more evident from a view of the manner in which it originated. He had shown, from the first report of the Secretary to the House, that, at that time, he contemplated, or at least had presented to Congress, only a continuation of the $3 800.000 anticipations. It appears, however, that he had made an application to the Bank, in order to know whether he could obtain farther Loans. It was, in answer to that demand, that the Bank had declared that they had lent as much and more than ment without being obliged to curtail the discounts of their customers; which lost to the Bank those customers and their deposites, and of course narrowed their powers of discounting and their profits; yet, to a certain amount, the United States had a right to expect the assistance of the Bank. A Bank was enabled to discount, in other words to lend money, in proportion to its capital, to the amount of deposites made there, and to the extent of its notes in circulation. The United States held one-fifth of that capital, they were depositors to an amount nearly equal to one-half of H. OF. R.J Debt due Bank of the United States. the original cash capital of the Bank, (for, their deposite consisted of the balance in the Treasury amounting on an average to $700,000, and of the moneys paid by the Collectors before they had passed the Treasury, which probably exceeded $300,000) and it was well known that by making all duties payable in notes of the Bank of the United States, those notes had acquired a far more extensive circulation than those of any other Bank. He therefore concluded, that grateful as we might be to that institution for past service, we had a just right to expect Loans to a certain amount, and those not to be discounted at once. If, however, he was mistaken in his opinion that the Bank did not want to be repaid the whole of their advances, let the information be communicated in an official manner, and he would withdraw his opposition. But even then he could not help lamenting that the Bank should have chosen such a time as this to make their demand. At a time when the European war prevented the possibility of borrowing there; when the effects of that war, by giving so much more profitable employment to capital, were felt in the same manner here; at a time when money could not be obtained without an extravagant premium, or a higher rate of interest, it was peculiarly disadvantageous to change our anticipations into a Funded Debt to borrow money under the existing circumstances; for we were obliged, in order to obtain money, to affix an irredeemable quality to the stock; (and it was not certain, whether, even then, money could be got on those terms) from whence two evils flowed; 1st. The perpetuating the Debt for the period of time during which we declared it irredeemable; and, 2d. The obligation to pay the present high interest during the whole of that time; for what rendered an irredeemable stock more valuable to the purchaser was the very cause which made it disadvantageous to us, to wit: that we could not avail ourselves of any event which would bring the rate of interest to its former average. Thus, although peace might take place in one year, and money could then be got much cheaper, we could not, if the present plan was adopted, draw any advantage from that event, but must continue for the whole twenty-three years to pay six per cent. on the proposed stock. Nor was this evil the worst to be apprehended. In his opinion, to postpone the payment of a Debt for twenty-three years, was not only a declaration that we meant that posterity, and not ourselves, should pay it, but in fact it was tantamount to a postponement forever, to a perpetuating of the Debt. In examining the causes of the anticipations and Domestic Loans which had thus accumulated, three events were looked upon as being out of the common course, and had given rise to an extraordinary expenditure, viz: the Indian war, the Western insurrection, and the Treaty with Algiers. Now he would ask, how they could answer for future events? and whether it was not within the ordinary course of things, that within every period of six or eight years, circumstances [APRIL, 1796. should take place which would cause expenditure to an equal amount? Indeed, considering their situation, an Indian war was more or less their natural state, and the expense of treating and of trading with them must at all events be incurred, and would prove considerable. He wished the peace with Algiers might be permanent; yet they had no security that that object would not require additional expenses. The Western insurrection was the only object of expenditure which they had well-grounded hopes would never recur, and which they might consider as extraordinary. But, if they had not that object to provide for, they would have some other. Fortifications, Naval Armament, unforeseen events of every description, would, in future, require upon an average an expense equal to what was called extraordinary expenditure. It was enough for posterity to provide for their own time; it was our duty to discharge ourselves the Debt we had incurred, and if it was found that after six years of peace and unexampled prosperity we were not able to discharge those expenses which had naturally arisen from the course of events during that prosperous period; if we declared that we meant to postpone their payment, till the present generation was over, we might well expect that the principle thus adopted would be cherished, that succeeding Legislatures and Administrations would follow our steps, and that we were laying the foundation of that national curse-a growing and perpetual Debt. Mr. HILLHOUSE said, the time was so far elapsed that he should only ask the attention of the committee to a few general remarks in answer to the gentleman from Pennsylvania [Mr. GALLATIN.] It could not be expected he should then go into the consideration of the minute and lengthy statement of the gentleman. Two things had been taken for granted by him, which are not wellfounded, and which being refuted, would overset his whole system, which are, that the United States are not bound to pay the instalments due to the Bank at this time, but might postpone them, and apply the money which shall come into the Treasury during the present year to discharge the expenses of the Government, and that the revenues of each year are only the amount of the moneys actually received into the Treasury in the course of the year. If the gentleman had examined the laws under which these anticipations were made, by way of Loan from the Bank, he would have found that all the moneys that shall come into the Treasury for duties on goods imported, in the years of 1794 and 1795, are by law absolutely appropriated to the discharge of those Loans, and until they are discharged no part of it can be made use of for any other purpose. It is the Government, therefore, that wants the accommodation and not the Bank. If these anticipations are not funded, resort must be had to temporary Loans to the same amount, and so the same operation will be necessary every year, unless a sufficient revenue can be raised in one year to discharge the current expenses of two, which, in the present state of our Foreign Debt, instalments of which are annually falling due, there is little pros |