CHAPTER VI.

Meeting of congress.-President's speech.-Report of the secretary of the treasury on public credit.-Debate thereon.-Bill for fixing the permanent seat of government. -Adjournment of congress.-Treaty with the Creek Indians.—Relations of the United States with Great Britain and Spain.-The President visits Mount Vernon.-Session of congress.-The President's speech.-Debates on the excise.-On a national bank. The opinions of the cabinet on the law.-Progress of parties.— War with the Indians.-Defeat of Harmar.-Adjournment of congress.

On the eighth of January, 1790, the President met both houses of congress in the senate chamber.

In his speech, which was delivered from the chair of the vice presi dent, after congratulating congress on the accession of the important state of North Carolina to the union, and on the prosperous aspect of American affairs, he proceeded to recommend certain great objects of legislation to their more especial consideration.

"Among the many interesting objects," continued the speech," which will engage your attention, that of providing for the common defence will merit your particular regard. To be prepared for war is one of the most effectual means of preserving peace.

"A free people ought not only to be armed but disciplined; to which end, a uniform and well digested plan is requisite; and their safety and interest require that they should promote such manufactories as tend to render them independent on others for essential, particularly for military supplies."

As connected with this subject, a proper establishment for the troops which they might deem indispensable, was suggested for their mature deliberation; and the indications of a hostile temper given by several tribes of Indians, were considered as admonishing them of the necessity of being prepared to afford protection to the frontiers, and to punish aggression.

The interests of the United States were declared to require that the means of keeping up their intercourse with foreign nations should be provided; and the expediency of establishing a uniform rule of naturalization was suggested.

After expressing his confidence in their attention to many improvements essential to the prosperity of the interior, the President added, nor am I less persuaded that you will agree with me in opinion that

there is nothing which can better deserve your patronage than the promotion of science and literature. Knowledge is in every country the surest basis of public happiness. In one, in which the measures of govvernment receive their impression so immediately from the sense of the community as in ours, it is proportionably essential. To the security of a free constitution it contributes in various ways: by convincing those who are intrusted with the public administration, that every valuable end of government is best answered by the enlightened confidence of the people; and by teaching the people themselves to know and to value their own rights; to discern and provide against invasions of them; to distinguish between oppression and the necessary exercise of lawful authority; between burdens proceeding from a disregard to their convenience, and those resulting from the inevitable exigencies of society; to discriminate the spirit of liberty from that of licentiousness, cherishing the first, avoiding the last, and uniting a speedy but temperate vigilance against encroachments, with an inviolable respect to the laws.

"Whether this desirable object will be best promoted by affording aids to seminaries of learning already established, by the institution of a national university, or by any other expedients, will be well worthy of a place in the deliberations of the legislature."

Addressing himself then particularly to the representatives he said, “I saw with peculiar pleasure at the close of the last session, the resolution. entered into by you, expressive of your opinion, that an adequate provision for the support of the public credit is a matter of high importance to the national honour and prosperity. In this sentiment I entirely concur; and to a perfect confidence in your best endeavours to devise such a provision as will be truly consistent with the end, I add an equal reliance on the cheerful co-operation of the other branch of the legislature. It would be superfluous to specify inducements to a measure in which the character and permanent interests of the United States are so obviously and so deeply concerned; and which has received so explicit a sanction from your declaration."

Addressing himself again to both houses, he observed, that the estimates and papers respecting the objects particularly recommended to their attention would be laid before them; and concluded with saying, "the welfare of our country is the great object to which our cares and efforts ought to be directed: and I shall derive great satisfaction from a co-operation with you in the pleasing though arduous task of insuring to our fellow citizens the blessings which they have a right to expect from a free, efficient, and equal government."

The answers of both houses were indicative of the harmony which subsisted between the executive and legislative departments.

Congress had been so occupied during its first session with those bills which were necessary to bring the new system into full operation, and to create an immediate revenue, that some measures which possessed great and pressing claims to immediate attention had been unavoidably deferred. That neglect under which the creditors of the public had been permitted to languish could not fail to cast an imputation on the American republics, which had been sincerely lamented by the wisest among those who administered the former government. The power to comply substantially with the engagements of the United States being at length conferred on those who were bound by them, it was confidently expected by the friends of the constitution that their country would retrieve its reputation, and that its fame would no longer be tarnished with the blots which stain a faithless people.

On the 9th of January, a letter from the secretary of the treasury to the speaker of the house of representatives was read, stating that in obedience to the resolution of the 21st of September, he had prepared a plan for the support of public credit, which he was ready to report when the - house should be pleased to receive it; and, after a short debate in which the personal attendance of the secretary for the purpose of making explanations was urged by some, and opposed by others, it was resolved that the report should be received in writing on the succeeding Thursday.

Availing himself of the latitude afforded by the terms of the resolution under which he acted, the secretary had introduced into his report an able and comprehensive argument elucidating and supporting the principles it contained. After displaying, with strength and perspicuity, the justice and the policy of an adequate provision for the public debt, he proceeded to discuss the principles on which it should be made.

"It was agreed," he said, " by all, that the foreign debt should be provided for according to the precise terms of the contract. It was to be regretted that, with respect to the domestic debt, the same unanimity of sentiment did not prevail."

The first point on which the public appeared to be divided, involved the question, "whether a discrimination ought not to be made between original holders of the public securities, and present possessors by purchase." After reviewing the arguments generally urged in its support, the secretary declared himself against this discrimination. He deemed it "equally unjust and impolitic; highly injurious even to the original holders of public securities, and ruinous to public credit." To the arguments with which he enforced these opinions, he added the authority of

the government of the union. From the circular address of congress to the states, of the 26th of April, 1783, accompanying their revenue system of the 18th of the same month, passages were selected indicating unequivocally, that in the view of that body the original creditors, and those who had become so by assignment, had equal claims upon the nation.

After reasoning at great length against a discrimination between the different creditors of the union, the secretary proceeded to examine whether a difference ought to be permitted to remain between them and the creditors of individual states.

"Both descriptions of debt were contracted for the same objects, and were in the main the same. Indeed, a great part of the particular debts of the states had arisen from assumptions by them on account of the union; and it was most equitable that there should be the same measure of retribution for all. There were many reasons, some of which were stated, for believing this would not be the case, unless the state debts should be assumed by the nation.

In addition to the injustice of favouring one class of creditors more than another which was equally meritorious, many arguments were urged in support of the policy of distributing to all with an equal hand from the same source.

After an elaborate discussion of these and some other points connected with the subject, the secretary proposed that a loan should be opened to the full amount of the debt, as well of the particular states, as of the union.

The terms to be offered were,

First. That for every one hundred dollars subscribed payable in the debt, as well interest as principal, the subscriber should be entitled to have two-thirds funded on a yearly interest of six per cent. (the capital redeemable at the pleasure of government by the payment of the principal) and to receive the other third in lands of the western territory at their then actual value. Or,

Secondly. To have the whole sum funded at a yearly interest of four per cent., irredeemable by any payment exceeding five dollars per annum both on account of principal and interest, and to receive as a compensation for the reduction of interest, fifteen dollars and eighty cents, payable in lands as in the preceding case. Or,

Thirdly. To have sixty-six and two-thirds of a dollar funded at a yearly interest of six per cent., irredeemable also by any payment exceeding four dollars and two-thirds of a dollar per annum on account both of principal and interest, and to have at the end of ten years twenty

six dollars and eighty-eight cents funded at the like interest and rate of redemption.

In addition to these propositions the creditors were to have an option of vesting their money in annuities on different plans; and it was also recommended to open a loan at five per cent. for ten millions of dollars, payable one half in specie, and the other half in the debt, irredeemable by any payment exceeding six dollars per annum both of principal and interest.

By way of experiment, a tontine on principles stated in the report was also suggested.

The secretary was restrained from proposing to fund the whole debt immediately at the current rate of interest, by the opinion, "that although such a provision might not exceed the abilities of the country, it would require the extension of taxation to a degree, and to objects which the true interest of the creditors themselves would forbid. It was therefore to be hoped and expected, that they would cheerfully concur in such modifications of their claims, on fair and equitable principles, as would facilitate to the government an arrangement substantial, durable, and satisfactory to the community. Exigencies might ere long arise which would call for resources greatly beyond what was now deemed sufficient for the current service; and should the faculties of the country be exhausted, or even strained to provide for the public debt, there could be less reliance on the sacredness of the provision.

"But while he yielded to the force of these considerations, he did not lose sight of those fundamental principles of good faith which dictate that every practicable exertion ought to be made, scrupulously to fulfil the engagements of government; that no change in the rights of its creditors ought to be attempted without their voluntary consent; and that this consent ought to be voluntary in fact, as well as in name. Consequently, that every proposal of a change ought to be in the shape of an appeal to their reason and to their interest, not to their necessities. To this end it was requisite that a fair equivalent should be offered, for what might be asked to be given up, and unquestionable security for the remainder." This fair equivalent for the proposed reduction of interest was, he thought, offered in the relinquishment of the power to redeem the whole debt at pleasure.

That a free judgment might be exercised by the holders of public securities in accepting or rejecting the terms offered by the government, provision was made in the report for paying to non-subscribing creditors, a dividend of the surplus which should remain in the treasury after paying the interest of the proposed loans: but as the funds immediately to