The Economic Policies of Alexander Hamilton. Hamilton Alexander

shall not deny that the outlet which the payment of duties furnished to the merchant was an additional motive to the reception of the paper. Nor is it proposed to take away this motive. There is now before the House a bill, one object of which is the establishment of a State impost on certain enumerated articles, in addition to that to be granted to the United States. It is computed on very good grounds, that the additional duties would amount to about £30,000, and as they would be payable in paper currency they would create a sufficient demand upon the merchant to leave him, in this respect, substantially the same inducement which he had before. Indeed, independent of this, the readiness of the trading people to take the money can never be doubted, while it will freely command the commodities of the country; for this, to them, is the most important use they can make of it.

      But besides the State impost, there must be other taxes: and these will all contribute to create a demand for the money; which is all we now mean when we talk of funds for its support; for there are none appropriated for the redemption of the paper.

      Upon the whole, the additional duties will be a competent substitute for those now in existence; and the general good-will of the community towards the paper will be the best security for its credit.

      Having now shown, Mr. Chairman, that there is no constitutional impediment to the adoption of the bill; that there is no danger to be apprehended to the public liberty from giving the power in question to the United States; that in view of the revenue the measure under consideration is not only expedient but necessary,—let us turn our attention to the other side of this important subject. Let us ask ourselves, what will be the consequence of rejecting the bill? What will be the situation of our national affairs if they are left much longer to float in the chaos in which they are now involved?

      Can our national character be preserved without paying our debts? Can the Union subsist without revenue? Have we realized the consequences which would attend its dissolution?

      If these States are not united under a Federal Government they will infallibly have wars with each other; and their divisions will subject them to all the mischiefs of foreign influence and intrigue. The human passions will never want objects of hostility. The Western territory is an obvious and fruitful source of contest. Let us also cast our eye upon the map of this State, intersected from one extremity to the other by a large navigable river. In the event of a rupture with them, what is to hinder our metropolis from becoming a prey to our neighbors? Is it even supposable that they would suffer it to remain the nursery of wealth to a distinct community?

      These subjects are delicate, but it is necessary to contemplate them, to teach us to form a true estimate of our situation.

      Wars with each other would beget standing armies—a source of more real danger to our liberties than all the powers that could be conferred upon the representatives of the Union. And wars with each other would lead to opposite alliances with foreign powers, and plunge us into all the labyrinths of European politics.

      The Romans, in their progress to universal dominion, when they conceived the project of subduing the refractory spirit of the Grecian republics which composed the famous Achaian League, began by sowing dissensions among them, and instilling jealousies of each other, and of the common head, and finished by making them a province of the Roman empire.

      The application is easy: if there are any foreign enemies, if there are any domestic foes to this country, all their arts and artifices will be employed to effect a dissolution of the Union. This cannot be better done than by sowing jealousies of the Federal head, and cultivating in each State an undue attachment to its own power.

      FINANCE

      FIRST REPORT ON THE PUBLIC CREDIT

       Table of Contents

      Communicated to the House of Representatives, January 14, 1790.

      Treasury Department, January 9, 1790.

      The Secretary of the Treasury, in obedience to the resolution of the House of Representatives of the twenty-first day of September last, has, during the recess of Congress, applied himself to the consideration of a proper plan for the support of the public credit, with all the attention which was due to the authority of the House, and to the magnitude of the object.

      In the discharge of this duty, he has felt, in no small degree, the anxieties which naturally flow from a just estimate of the difficulty of the task, from a well-founded diffidence of his own qualifications for executing it with success, and from a deep and solemn conviction of the momentous nature of the truth contained in the resolution under which his investigations have been conducted,—“That an adequate provision for the support of the public credit is a matter of high importance to the honor and prosperity of the United States.”

      With an ardent desire that his well-meant endeavors may be conducive to the real advantage of the nation, and with the utmost deference to the superior judgment of the House, he now respectfully submits the result of his inquiries and reflections to their indulgent construction.

      In the opinion of the Secretary, the wisdom of the House, in giving their explicit sanction to the proposition which has been stated, cannot but be applauded by all who will seriously consider and trace, through their obvious consequences, these plain and undeniable truths:

      That exigencies are to be expected to occur, in the affairs of nations, in which there will be a necessity for borrowing.

      That loans in time of public danger, especially from foreign war, are found an indispensable resource, even to the wealthiest of them.

      And that, in a country which, like this, is possessed of little active wealth, or, in other words, little moneyed capital, the necessity for that resource must, in such emergencies, be proportionably urgent.

      And as, on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so, on the other, it is equally evident that, to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.

      For, when the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make. Nor does the evil end here; the same disadvantage must be sustained on whatever is to be bought on terms of future payment.

      From this constant necessity of borrowing and buying dear, it is easy to conceive how immensely the expenses of a nation, in a course of time, will be augmented by an unsound state of the public credit.

      To attempt to enumerate the complicated variety of mischiefs, in the whole system of the social economy, which proceed from a neglect of the maxims that uphold public credit, and justify the solicitude manifested by the House on this point, would be an improper intrusion on their time and patience.

      In so strong a light, nevertheless, do they appear to the Secretary, that, on their due observance, at the present critical juncture, materially depends, in his judgment, the individual and aggregate prosperity of the citizens of the United States; their relief from the embarrassments they now experience; their character as a people; the cause of good government.

      If the maintenance of public credit, then, be truly so important, the next inquiry which suggests itself is: By what means is it to be effected? The ready answer to which question is, by good faith; by a punctual performance of contracts. State, like individuals, who observe their engagements are respected and trusted, while the reverse is the fate of those who pursue an opposite conduct.

      Every breach of the public engagements, whether from choice or necessity, is, in different degrees, hurtful to public credit. When such a necessity does truly exist, the evils of it are only to be palliated by a scrupulous attention, on the part of the Government, to carry the violation no further than the necessity absolutely requires, and to manifest, if the nature of the case admit of it, a sincere disposition to make reparation whenever circumstances shall permit. But, with every possible mitigation, credit must suffer, and numerous mischiefs ensue. It is, therefore,