This Digression opens the way to a comparison between foreign and domestic Loans. If the Loan be domestic, Money must be diverted from those Channels in which it would otherwise have flowed, and therefore, either the Public must give better Terms than Individuals, or there must be Money enough to supply the Wants of both. In the latter Case, if the Public did not borrow, the Quantity of Money would exceed the Demand, and the Interest would be lowered ; borrowing by the Public, therefore, would keep up the Rate of Interest, which brings the latter Case within the Reason of the former. If the Public outbid Individuals, those Individuals are deprived of the Means of extending their Industry. So that no Case of a domestic Loan can well be supposed, where some public Loss will not arise to counterballance the public Gain; except when the Creditor spares from his Consumption to lend to the Government, which Operates a national Oeconomy. It is however an Advantage peculiar to domestic Loans, that they give Stability to Government, by combining together the Interests of moneyed Men for it’s Support; and consequently, in this Country, a domestic Debt would greatly contribute to that Union, which seems not to have been sufficiently attended to, or provided for, in forming the national Compact. Domestic Loans are also useful from the farther Consideration that as Taxes fall heavy on the lower Orders of a Community, the Releif obtained for them by such Loans, more than counterballances the Loss sustained by those who would have borrowed Money to extend their Commerce or Tillage. Neither is it a refinement to observe, that since a Plenty of Money and consequent Ease of obtaining it, induce Men to engage in Speculations which are often unprofitable, the Check which these receive is not injurious, while the Releif obtained for the Poor is highly beneficial.
By making foreign Loans, the Community (as such) receive the same extensive Benefits which one Individual does in borrowing of another. This Country was always in the Practice of making such Loans. The Merchants in Europe trusted those of America. The American Merchants trusted the Country Storekeepers; and they the People at large. This advance of Credit may be Stated at not less than twenty Million of Dollars. And the Want of that Credit is one principle Reason of those Usurious Contracts mentioned above. These have been checked by the Institution of the Bank, but the Funds of that Corporation, not permitting those extensive Advances which the Views of different People require, the Price given for particular Accommodations of Money continues to be enormous; and that again Shews, that to make domestic Loans would be difficult if not impracticable. The Merchants not having now that extensive Credit in Europe which they formerly had, the obtaining such Credit by the Government, becomes in some Sort necessary. But there remains an Objection with many against foreign Loans, which (tho it arises from a superficial View of the Subject) has no little Influence. This is, that the Interest will form a Balance of Trade against us, and drain the Country of Specie; which is only saying in other Words, that it would be more convenient to receive Money as a Present, than as a Loan. For the Advantages derived by the Loan exist, notwithstanding the Payment of Interest. To shew this more clearly, a Case may be Stated which in this City is very familiar. An Island in the Delaware overflowed at high Water has, for a given Sum, suppose a thousand Pounds, been banked in, drained and made to produce by the Hay sold from it at Philadelphia a considerable Sum annually, for Instance two hundred Pounds. If the owner of such an Island had borrowed (in Philadelphia) the thousand Pounds to improve it, and given six per Cent Interest, he would have gained a net Revenue of one hundred and forty Pounds. This certainly would not be a Balance of Trade against his Island, nor the draining it of Specie. He would gain considerably, and the City of Philadelphia also would gain, by bringing to Market an increased Quantity of a necessary Article. In like manner, Money lent by the City of Amsterdam to clear the Forests of America, would be beneficial to both. Draining Marshes and bringing Forests under Culture are beneficial to the whole human Race, but most so to the Proprietor. But at any Rate, in a Country and in a situation like ours, to lighten the Weight of present Burthens (by Loans) must be good Policy. For as the Governments acquire more Stability, and the People more wealth, the former will be able to raise, and the latter to pay much greater Sums than can at present be expected.
What has been said on the general nature and Benefit of public Loans, as well as their particular Utility to this Country, contains more of Detail than is necessary for the United States in Congress, tho perhaps not enough for many of those to whose consideration this Subject must be Submitted. It may seem Superfluous to add that Credit is necessary to the obtaining of Loans. But among the many extraordinary Conceptions which have been produced, during the Present Revolution, it is neither the least prevalent, nor the least pernicious, that Foreigners will trust us with Millions, while our own Citizens will not trust us with a Shilling. Such an opinion must be unfounded and will appear to be false at the first Glance; Yet Men are (on some Occasions) so willing to deceive themselves, that the most flattering Expectations will be formed from the Acknowledgement of American Independance by the States General. But surely no reasonable Hope can be raised on that Circumstance, unless something more be done by ourselves. The Loans made to us hitherto, have either been by the Court of France, or on their Credit. The Government of the United Netherlands are so far from being able to lend, that they must borrow for themselves. The most therefore which can be asked from them, is to become Security for America to their own Subjects, but it cannot be expected that they will do this, untill they are assured, and convinced, that we will punctually pay. This follows necessarily from the Nature of their Government, and must be clearly seen by the Several States, as well as by Congress, if they only consider what Conduct they would pursue on a similar Occasion. Certainly Congress would not put themselves in a situation which might oblige them to call on the several States for Money to pay the Debts of a foreign Power. Since then no Aid is to be looked for from the Dutch Government, without giving them Sufficient Evidence of a Disposition and Ability to pay both the Principal and Interest of what we borrow; and since the same Evidence which would convince the Government, must convince the Individuals who compose it; Asking the Aid of Government must either be unnecessary or ineffectual. Ineffectual before the Measures taken to establish our Credit, and unnecessary afterwards.
We are therefore brought back to the Necessity of establishing public Credit. And this must be done at Home, before it can be extended abroad. The only Question which can remain, is with Respect to the Means. And here it must be remembered that a free Government whose natural offspring is public Credit, cannot have sustained a Loss of that Credit unless from particular Causes; and therefore those Causes must be investigated and removed, before the Effects will cease. When the continental Money was issued, a greater Confidence was shewn by America, than any other People ever exhibited. The general Promise of a Body not formed into, nor claiming to be a Government, was accepted as current coin, and it was not until long after an Excess of quantity had forced on Depreciation, that the Validity of these Promises was questioned. Even then the public Credit still existed in a Degree, nor was it finally lost untill March 1780, when an Idea was intertained that Government had committed Injustice. It is useless to enter into the Reasons for and against the Resolutions of that Period. They were adopted, and are now to be considered only in Relation to their Effects. These will not be altered by saying that the Resolutions were misunderstood; for in those Things which depend on public Opinion it is no matter (so far as consequences are concerned) how that opinion is influenced. Under present circumstances therefore, it may be considered as an uncontrovertible Proposition, that all paper Money ought to be absorped by Taxation (or otherwise) and destroyed before we can Expect our public Credit to be fully reestablished. For so long as there be any in Existence, the Holder will view it as a monument of national Perfidy.
But this alone would be taking only a Small Step in the important Business of establishing national Credit. There are a great Number of Individuals in the United States, who trusted the Public in the Hour of Distress, and who are impoverished, and even ruined by the Confidence they reposed. There are others, whose Property has been wrested from them by Force to Support the War, and to whom Certificates have been given in lieu of it which are entirely useless. It needed not Inspiration to shew, that Justice establisheth a Nation, neither are the Principles of Religion necessary to evince, that political Injustice will receive political Chastizement. Religious Men will cherish these Maxims in proportion to the additional Force they derive from divine Revelation. But our own Experience will Shew, that from a Defect of justice this Nation is not established; and that her Want of Honesty is severely punished by the Want of Credit. To this Want of Credit must be attributed the Weight of Taxation for Support of the War, and the Continuance of that Weight by Continuance of the War. It is therefore with the greatest Propriety your Petitioners already mentioned have stated in their Memorial, that both Policy and Justice require a solid Provision for funding the public Debts. It is with Pleasure Sir that I see this numerous, meritorious and oppressed Body of Men, who are Creditors of the public, begining to exert themselves for the obtaining of Justice. I hope they may succeed, not only because I wish well to a righteous Pursuit, but because this Success will be the great Ground work of a Credit which will carry us safely thro the present just, important and necessary War, which will combine us closely together on the Conclusion of a Peace, which will always give to the Supreme Representative of America a Means of acting for the general Defence on Sudden Emergencies, and which will, of consequence, procure the Third of those great Objects for which we contend, Peace,
Liberty, and Safety
.
Such Sir are the cogent Principles by which we are called on to provide solid Funds for the national Debt. Already Congress have adopted a Plan for liquidating all past Accounts; and if the States shall make the necessary Grants of Revenue, what remains will be a simple executive Operation which will presently be explained. But however powerful the Reasons in favor of such Grants, over and above those Principles of moral Justice which none, however exalted, can part from with Impunity, still there are Men who (influenced by penurious selfishness) will grumble at the Expence, and who will assert the impossibility of sustaining it. On this Occasion the Sensations with Respect to borrowing are reversed. All would be content to relieve themselves, by Loan, from the Weight of Taxes, but many are unwilling to take up, as they ought, the Weight of Debt. Yet this must be done, before the other can happen, and it is not so great but that we Should find immediate Releif by assuming it,
even if it were a foreign Debt
. I say if it were a foreign Debt, because I shall attempt to shew, first that being
a domestic Debt
, to fund it will cost the Community Nothing and secondly that it will produce (on the Contrary) a considerable Advantage. And as to the first Point, one Observation will Suffice. The Expenditure, has been made, and a Part of the Community have sustained it. If the Debt were to be paid, by a single Effort of Taxation; it could only create a Transfer of Property from one Individual to another, and the agregate Wealth of the Whole Community would be precisely the same. But since Nothing more is attempted than merely to fund the Debt by providing for the Interest (at six per Cent) The Question of Ability is resolved to this single Point, whether it is easier for a Part of the people to pay one hundred Dollars, than for the whole People to pay six Dollars. It is equally clear, tho’ not equally evident, that a considerable Advantage would be produced, by funding our Debts, over and above what has been already mentioned, as the Consequence of National Credit. This Advantage is threefold. First, many Persons by being Creditors of the Public, are deprived of those Funds which are necessary to the full Exercise of their Skill and Industry. Consequently the Community are deprived of the Benefits which would result from that Exercise, whereas if these Debts which are in a manner dead, were brought back to existence, monied men would purchase them up (tho perhaps at a considerable Discount) and thereby restore to the Public many useful Members who are now entirely lost; and extend the Operations of many more to considerable Advantage. For altho not one additional Shilling would be, by this Means, brought in; yet by distributing Property into those Hands which could render it most productive, the Revenue would be increased, while the original Stock continued the Same. Secondly, many Foreigners who make Speculations to this Country would, instead of ordering back Remittances, direct much of the Proceeds of their Cargoes to be invested in our public Funds; which, according to Principles already established, would produce a clear Advantage, with this Addition (from peculiar Circumstances) that it would Supply the Want of Credit to the mercantile Part of Society. The last, but not least, Advantage is, that in restoring Ease, Harmony and Confidence, not only the Government (being more respectable) would be more respected, and consequently better obeyed; but the mutual Dealings among Men, on private Credit, would be facilitated. The Horrors which agitate People’s Minds, from an Apprehension of depreciating Paper, would be done away. The secret Hoards would be unlocked. In the same Moment, the Necessity of Money would be lessened, and the Quantity increased. By these Means the Collection of Taxes would be facilitated, and thus, instead of being Obliged to give valuable Produce for useless Minerals, that Produce would purchase the Things we stand in need of, and we should obtain a sufficient circulating Medium, by giving the People what they have always a Right to Demand, solid Assurance in the Integrity of their Rulers.