University of Virginia Library

FEBRUARY l8. PUBLIC DEBT

Mr. Madison said, that the opponents of his proposition
had imposed on its friends not only a heavy task, by the
number of their objections, but a delicate one by the nature

of some of them. It had been arraigned as an embarrassing
measure which ought to be facilitated, and producing discussions
which might end in disagreeable consequences. However
painful it might be to contradict the wishes of gentlemen
whom he respected, he could promise nothing more in the
present case than his endeavors to disappoint their apprehensions.
When his judgment could not yield to the propositions
of others, the right to make and support his own, was
a right which he could never suffer to be contested. In exercising
it, he should study to maintain that moderation and
liberality which were due to the greatness of the subject
before the committee. He felt pleasure in acknowledging
that the like spirit had, in general, directed the arguments on
the other side. Free discussions, thus conducted, are not
only favorable to a right decision, but to a cheerful acquiescence
of the mistaken opponents of it. They might have
the further advantage of recommending the results to the
public, by fully explaining the grounds of it. If the pretensions
of a numerous and meritorious class of citizens be not
well founded, or cannot be complied with, let them see that
this is the case, and be soothed, under their disappointment,
with the proof that they have not been overlooked by their
country.

He would proceed now to review the grounds on which the
proposition had been combated; which he should do without
either following those who had Wandered from the field of
fair argument, or avoiding those who had kept within its
limits.

It could not have escaped the committee, that the gentlemen
to whom he was opposed, had reasoned on this momentous
question as on an ordinary case in a Court of Law; that
they had equally strained all the maxims that could favor the
purchasing, or be adverse to the original holder; and that
they had dwelt with equal pleasure on every circumstance
which could brighten the pretensions of the former, or discredit
those of the latter. He had not himself attempted, nor

did he mean to undervalue the pretensions of the actual
holders. In stating them, he had even used as strong terms
as they themselves could have dictated; but beyond a certain
point he could not go. He must renounce every sentiment
which he had hitherto cherished, before his complaisance
could admit that America ought to erect the monuments of
her gratitude, not to those who saved her liberties, but to
those who had enriched themselves in her funds.

All that he wished was, that the claims of the original
holders, not less than those of the actual holders, should be
fairly examined and justly decided. They had been invalidated
by nothing yet urged. A debt was fairly contracted;
according to justice and good faith, it ought to have been
paid in gold or silver; a piece of paper only was substituted.
Was this paper equal in value to gold or silver? No. It was
worth, in the market, which the argument for the purchasing
holders makes the criterion, no more than one-eighth or one-seventh
of that value. Was this depreciated paper freely accepted?
No. The Government offered that or nothing. The
relation of the individual to the Government, and the circumstances
of the offer, rendered the acceptance a forced, not a
free one. The same degree of constraint would vitiate a
transaction between man and man before any Court of Equity
on the face of the earth. There are even cases where consent
cannot be pretended; where the property of the planter or
farmer had been taken at the point of the bayonet, and a
certificate presented in the same manner. But why did the
creditors part with their acknowledgment of the debt? In
some instances, from necessity; in others, from a well-founded
distrust of the public. Whether from the one or the other,
they had been injured; they had suffered loss, through the
default of the debtor; and the debtor cannot, in justice or
honor, take advantage of the default.

Here, then, was a debt acknowledged to have been once
due, and which was never discharged; because the payment
was forced and defective. The balance, consequently, is still

due, and is of as sacred a nature as the claims of the purchasing
holder can be; and if both are not to be paid in the whole,
is equally entitled to payment in part. He begged gentlemen
would not yield too readily to the artificial niceties of
forensic reasoning; that they would consider not the form,
but the substance—not the letter, but the equity—not the
bark, but the pith of the business. It was a great and an
extraordinary case; it ought to be decided on the great and
fundamental principles of justice. He had been animadverted
upon for appealing to the heart as well as the head: he would
be bold, nevertheless, to repeat, that, in great and unusual
questions of morality, the heart is the best judge.

It had been said, by a member from Massachusetts, that
the proposition was founded on a new principle in Congress.
If the present Congress be meant, that is not strange, for
Congress itself is new; if the former Congress be meant, it is
not true, for the principle is found in an act which had been
already cited. After the pay of the army had, during the
war, been nominally and legally discharged in depreciated
paper, the loss was made up to sufferers.

It had been said, by a member from New York, that this
case was not parallel, there being no third party like the
present holders of certificates. This objection could not be
valid. The Goverment paid ten dollars worth in fact, but
only one to the soldier. The soldier was then the original
holder. The soldier assigned it to the citizen; the citizen then
became the actual holder. What was the event? The loss
of the original holder was repaired, after the actual holder
had been settled with, according to the highest market value
of his paper.

He did not mean, however, to decide on the whole merits
of this last transaction; or to contend for a similitude, in all
respects, between the two kinds of paper. One material difference
was, that the bills of credit, by more frequent transfers,
and by dividing the change of value among a greater
number of hands, rendered the effect of less consequence to

individuals, and less sensible to the public mind. But this
difference, whatever force it might give to the claims of the
purchasing holder of certificates, could diminish nothing from
the claims of the original holders who assigned them.

It had been said, by another member from Massachusetts,
that the old Government did every thing in its power. It
made requisitions, used exhortations, and in every respect
discharged its duty; but it was to be remembered, that the
debt was not due from the Government, but the United
States. An attorney, with full powers to form, without the
means to fulfil engagements, could never, by his ineffectual
though honest efforts, exonerate his principal.

He had been repeatedly reminded of the address of Congress
in 1783, which rejected a discrimination between original
and purchasing holders. At that period, the certificates
to the army, and citizens at large, had not been issued. The
transfers were confined to loan-office certificates, were not
numerous, and had been, in great part, made with little loss to
the original creditor. At present, the transfers extend to a
vast proportion of the whole debt, and the loss to the original
holders has been immense. The injustice which has taken
place has been enormous and flagrant, and makes redress a
great national object. This change of circumstances destroys
the argument from the act of Congress referred to; but if
implicit regard is to be paid to the doctrines of that act, any
modification of the interest of the debt will be as inadmissible
as a modification of the principal.

It had been said, that if the losses of the original creditors
are entitled to reparation, Congress ought to repair those
suffered from paper money—from the ravages of war, and
from the act of barring claims not produced within a limited
time. As to the paper money, either the case is applicable,
or it is not; if not applicable, the argument fails; if applicable,
either the depreciated certificates ought to be liquidated
by a like scale, as was applied to the depreciated money; or
the money, even if the whole mass of it was still in circulation,

ought now to be literally redeemed, like the certificates.
Leaving the gentleman to make his own choice of these
dilemmas, he would only add, himself, that if there were no
other difference between the cases, the manifest impossibility
of redressing the one, and the practicability of redressing the
other, was a sufficient answer to the objection. With respect
to the towns burnt, and other devastations of war, it was
taught, by the writers on the law of nations, that they were
to be numbered among the inevitable calamities of mankind.
Still, however, a Government owed them every alleviation
which it could conveniently afford; but no authority could
be found that puts on the same footing with those calamities,
such as proceed from a failure to fulfil the direct and express
obligations of the public. The just claims barred by the act
of limitation, were, in his opinion, clearly entitled to redress.
That act was highly objectionable. The public, which was
interested in shortening the term, undertook to decide, that
no claim, however just, should be admitted, if not presented
within nine months. The act made none of the exceptions
usual in such acts, not even in favor of the most distant parts
of the Union. In many instances, it had been absolutely impossible
for the persons injured to know of the regulation.
Some of these instances were within his own knowledge. To
limit the duration of a law to a period, within which it could
not possibly be promulgated, and then take advantage of
the impossibility, would be imitating the Roman tyrant, who
posted up his edicts so high that they could not be read, and
then punished the people for not obeying them.

It has been said that if the purchased certificates were
funded at the rate proposed, they would fall in the market,
and the holders be injured. It was pretty certain, that the
greater part, at least, would be gainers. He believed that
the highest market price, especially with the arrears of interest
incorporated, well funded at six per cent. would prevent
every loss that could justify complaint.

But foreigners had become purchasers, and ought to be

particularly respected. Foreigners, he remarked, had themselves
made a difference between the value of the foreign and
domestic debt; they would, therefore, the less complain of a
difference made by Government here. It was his opinion
that the terms stated in the proposition would yield a greater
profit to the foreign purchasers than they could have got for
their money if advanced by them in any of the funds of
Europe.

The proposition had been charged with robbing one set of
men to pay another. If there were robbery in the case, it
had been committed on the original creditors. But, to speak
more accurately, as well as more moderately, the proposition
would do no more than withhold a part from each of two
creditors, where both were not to be paid the whole.

A member from New York has asked, whether an original
creditor, who had assigned his certificate, could, in conscience,
accept a reimbursement in the manner proposed? He would
not deny that assignments might have been made with such
explanations, or under such circumstances, as would have
that effect; but, in general, the assignments have been made
with reference merely to the market value, and the uncertainty
of the steps that might be taken by the Government.
The bulk of the creditors had assigned under circumstances
from which no scruple could arise. In all cases where a
scruple existed, the benefit of the provision might be renounced.
He would, is turn, ask the gentleman, whether
there was not more room to apprehend that the present holder,
who had got his certificate of a distressed and meritorious
fellow-citizen for one-eighth, or one-tenth its ultimate value,
might not feel some remorse in retaining so unconscionable
an advantage?

Similar propositions, it was said, had been made and rejected
in the State Legislatures. This was not a fact. The propositions
made in the State Legislatures were not intended to
do justice to the injured, but to seize a profit to the public.

But no petitions for redress had come from the sufferers.

Was merit, then, to be the less regarded, because it was
modest? Perhaps, however, another explanation ought to
be given. Many of the sufferers were poor and uninformed.
Those of another description were so dispersed, that their interests
and efforts could not be brought forward. The case
of the purchasing holders was very different.

The Constitutionality of the proposition had been drawn
into question. He asked whether words could be devised
that would place the new Government more precisely in the
same relation to the real creditors with the old? The power
was the same; the obligation was the same. The means only
were varied.

An objection had been drawn from the article prohibiting
ex post facto laws. But as ex post facto laws relate to criminal,
not civil cases, the Constitution itself requires this definition,
by adding to a like restriction on the States an express one
against retrospective laws of a civil nature.

It had been said that foreigners had been led to purchase,
by their faith in the article of the Constitution, relating to the
public debts. He would answer this objection by a single
fact: Foreigners had shown, by the market price in Europe,
that they trusted the nature of foreign debt more under the
old Government, than the nature of the domestic debt under
the new Government.

Objections to the measure had been drawn from its supposed
tendency to impede public credit. He thought it, on
the contrary, perfectly consistent with the establishment of
public credit. It was in vain to say, that Government ought
never to revise measures once decided. Great caution on this
head ought, no doubt, to be observed: but there were situations
in which, without some Legislative interposition, the
first principles of justice, and the very ends of civil society,
would be frustrated. The gentlemen themselves had been
compelled to make exceptions to the general doctrine: they
would probably make more before the business was at an end.

It had been urged, that if Government should interpose in

the present case, as interposition would be authorized in any
case whatever where the stock might fluctuate, the principle
would apply as well to a fall of sixty or seventy per cent. as
to a fall of six hundred or seven hundred per cent. He could
not admit this inference. A distinction was essential between
an extreme case, and a case short of it. The line was difficult
to be drawn; but it was no more incumbent on him than on
his opponents to draw it. They themselves could not deny
that a certain extremity of the evil would have justified the
interposition. Suppose that the distress of the alienating
creditors had been ten times as great as it was; that instead
of two, three, or four shillings in the pound, they had received
a farthing only in the pound; and that the certificates lay
now in the hands of the purchasers in that state, or even at a
less value, was there a member who would rise up and say,
that the purchasers ought to be paid the entire nominal sum,
and the original sufferer be entitled to no indemnification
whatever?

Gentlemen had triumphed in the want of a precedent to
the measure. No Government, it was said, had interposed to
redress fluctuations in its public paper. But where was the
Government that had funded its debts under the circumstances
of the American debt? If no government had done
so, there could be no precedent either for or against the
measure, because the occasion itself was unprecedented.
And if no similar occasion had before existed in any country,
the precedent to be set would at least be harmless, because
no similar occasion would be likely to happen in this.

If gentlemen persisted, however, in demanding precedents,
he was happy in being able to gratify them with two, which,
though not exactly parallel, were, on that account, of the
greater force, since the interposition of Government had
taken place where the emergency could less require them.

The first was the case of the Canada bills. During the war
which ended in 1763, and which was attended with a revolution
of the Government in Canada, the supplies obtained for

the French army in that province were paid for in bills of
exchange and certificates. This paper depreciated, and was
bought up chiefly by British merchants. The sum and the
depreciation were so considerable as to become a subject of
negotiation between France and Great Britain at the peace.
The negotiations produced a particular article, by which it
was agreed by France that the paper ought to be redeemed,
and admitted by Great Britain that it should be redeemed at
a liquidated value. In the year 1766 this article was accordingly
carried into effect by Ministers from the two Courts,
which reduced the paper in the hands of the British holders,
in some instances, as much as seventy-five per cent. below its
nominal value. It was stated, indeed, by the reporter of the
case, that the holders of the paper had themselves concurred
in the liquidation; but it was not probable that the concurrence
was voluntary. If it was voluntary, it shows that they
themselves were sensible of the equity of the sacrifice.

The other case was of still greater weight, as it had no relation
to war or treaty, and took place in the nation which has
been held up as a model with respect to public credit. In the
year 1713, the civil list of Great Britain had fallen into arrears
to the amount of £500,000. The creditors who had furnished
supplies to the Government, had, instead of money, received
debentures only from the respective officers. These had depreciated.
In that state, they were assigned in some instances;
in others, covenanted to be assigned. When the
Parliament appropriated funds for satisfying these arrears,
they inserted an express provision in the act, that the creditors
who had been obliged, by the default of Government, to dispose
of their paper at a loss, might redeem it from the assignees
by repaying the actual price, with an interest of six
per cent., and that all agreements and covenants to assign
should be absolutely void. Here then was an interposition
on the very principle, that a Government ought to redress the
wrongs, sustained by its default, and on an occasion trivial
when compared to that under consideration; yet it does

not appear that the public credit of the nation was injured
by it.

The best source of confidence in Government was the apparent
honesty of its views. The proposition could not
possibly be ascribed to any other motive than this, because
the public was not to gain a farthing by it. The next source
was an experienced punctuality in the payments due from
the Government. For this support to public credit, he relied
on what had been experienced by a part of the foreign creditors;
on the provision to be made for the residue; and on the
punctuality which, he flattered himself, would be observed in
all future payments of the domestic creditors. He was more
apprehensive of injury to public credit from such modifications
of the interest of the public debt as some gentlemen
seemed to have in view. In these the public would be the
gainer, and the plea of inability the more alarming, because
it was so easy to set up, so difficult to be disproved, and for
which, consequently, the temptations would be so alluring.

The impracticability of the measure was the remaining
ground on which it had been attacked. He did not deny that
it would be attended with difficulties and that perfect justice
would not be done. But these were not the questions. It
was sufficient that a grievous injustice would be lessened, and
that the difficulties might be surmounted. What he had in
view was, that for the conveniency of claimants some authority
should be provided, and properly distributed through
the Union, in order to investigate and ascertain the claims:
and that, for the security of the public, the burden of proof
should be thrown on the claimants. A scrutiny on this plan,
aided by original settlements in the books of the army department,
and the State commissioners, and other office
documents, would be a remedy, at once, for all the difficulties
stated with regard to fictitious names, certificates issued as
money by commissaries and quartermasters, due bills, &c.

For some particular cases, special provisions might be requisite.
The case of loan-office certificates, alienated at early

periods, before they were much depreciated, fell under this
description. Legacies might be another. He would have no
objection to some special regulation, as to the payments of
debts in certificates to persons within the British lines, said
to have been authorized by the laws of New York; though he
presumed few such payments had been made, and that of
this few the greater part had, by this time, passed from the
creditors into other hands. There might be a few other cases
equally entitled to some particular attention in the details of
the provision. As to the merchants who had compounded
for their debts in certificates, or persons who had exchanged
bonds for them, it could not be doubted that the transactions
had reference to the market value of the paper, and therefore
had nothing peculiar in them.

The expense incident to such a plan of investigation ought
to form no difficulty. It bears no proportion to the expense
already incurred by commissioners, &c., for effecting a less
proportion of justice. Rather than justice should not be
done, the expense might be taken out of the portion to the
original sufferers.

The danger of frauds and perjuries had been worked up
into a formidable objection. If these had always been
equally alarming, no provision could ever have been made
for the settlement or discharge of public debts. He reminded
the committee of the frauds and perjuries for which a door
had been opened by the final settlements, &c., of the frauds
and perjuries inseparable from the collection of imposts and
excises; yet these were all submitted to as necessary evils,
because justice could not be done without them. The frauds
and perjuries incident to this supplementary provision for justice
must be very inconsiderable in number; and still more so,
when compared either with the object to be obtained, or with
the like evils already encountered in pursuit of a like object.

Great ingenuity and information had been exerted by the
gentlemen on the other side in raising difficulties. He was
sure that, after an adoption of the proposition, the same

exertion would be used in removing them, and with such aid,
the idea of impracticability would vanish.