Part 2 (2/2)
into the judiciary, particularly those who had served in the state courts and commanded public confidence. His choice for Chief Justice fell upon John Jay. Rutledge, of South Carolina, Wilson, of Pennsylvania, Cus.h.i.+ng, of Ma.s.sachusetts, Harrison, of Maryland, and Blair, of Virginia, were first named as a.s.sociate Justices. Was.h.i.+ngton chose his chief advisers also from different sections. Thomas Jefferson was invited to become Secretary of State--a post which he accepted somewhat reluctantly. Hamilton did not have to be urged to take the heads.h.i.+p of the Treasury. Knox was given the superintendence of a military establishment which then numbered only a few hundred men.
Edmund Randolph was appointed Attorney-General.
Before Congress adjourned in the fall, it adopted and sent to the States for ratification twelve amendments to the new Const.i.tution. There were those who thought this action precipitate. Why tinker with a const.i.tution which had hardly been tried? To all such Madison replied cogently that the amendments which his committee reported did not alter the framework of the instrument, but added only certain safeguards to individual rights. The lack of a declaration of rights had been deplored in every convention and had cost the support of many respectable people.
Moreover, two communities had not yet ”thrown themselves into the bosom of the Confederacy.” The wisdom of this course was attested by the prompt ratification of ten of the twelve proposed amendments.
On November 21, 1789, North Carolina ratified the Const.i.tution, leaving Rhode Island to a position of hazardous isolation. Congress was considering a bill to cut off the commercial privileges of the State, by putting her on the footing of a foreign nation, when news came that a convention at Newport had ratified the Const.i.tution by the narrow margin of two votes. In the following year the number of States was increased by the admission of Vermont. The admission of Kentucky followed in 1792; and Congress paved the way for the entrance of other States into the Union by organizing the Southwest Territory out of Western lands ceded by the three southernmost States. The expansion of the United States had begun, bringing with it unforeseen problems.
The severest labors of Congress began in the second session, when the new Secretary of the Treasury presented his first report on public credit. Shortly after the Convention of 1787, Hamilton had expressed his belief that one of the great dangers which threatened American society was ”the depredations which the democratic spirit is apt to make on property.” Distrusting the political capacity of the people, whom in private he called ”a great beast,” he believed that the new Government would succeed or fail in just the proportion that it enlisted the support of the influential and wealthy cla.s.ses. He set himself deliberately to the task of identifying the interests of the propertied cla.s.ses with those of the Government.
It was a sorry state in which Hamilton found the national finances. The foreign debt, including princ.i.p.al and arrears of interest, amounted to $11,710,000. The domestic debt, much more difficult to determine, was not less than $42,414,000, about one third of which was made up of arrears of interest. The debts of the individual States, princ.i.p.al and interest, were estimated at about $25,000,000. These were heavy burdens for the shoulders of a young Government whose fiscal powers were as yet untested. But the shoulders had to be fitted to the burden, if public credit was to be restored.
In this first report on public credit, January 9, 1790, Hamilton a.n.a.lyzed the financial situation with masterly clearness and set forth his plans for the adjustment of the national debt. The determination of Congress to make adequate provision for the support of the public credit was justified in his mind by every consideration. A country like the United States, possessed of little active wealth, must borrow in emergencies; to borrow on good terms, it must establish its credit; and to maintain its credit, it must faithfully observe its contracts. But over and above these considerations, dictated by expediency, were ”immutable principles of moral obligation.” Moreover, the national debt was no ordinary obligation: it was ”the price of liberty.” On all sides, it was agreed that the debt contracted abroad should be provided for in the precise terms of the contracts.
It was only in regard to the domestic debt that differences of opinion were likely to arise. The notes representing this debt were of all sorts and kinds. Much of it had changed hands and all of it had depreciated in value. Some of it still circulated as a monetary medium. The vital question was: how were the present holders to be paid? At the face value of the paper, or at the price for which it had been purchased? Hamilton argued firmly against any discrimination, both because it was a breach of contract and because it was a violation of the rights of a fair buyer.
When this part of Hamilton's plan came before Congress in concrete form, it gave rise to the bitterest debate which had been heard. That it would give opportunity for immoderate speculation was plain enough; yet every alternative which aimed to do justice by both the original and the present holder was confessedly inadequate, when a certificate of indebtedness, for example, had pa.s.sed through several hands without record.
No sooner was Hamilton's proposal made than a wild scramble began for the possession of the hitherto worthless government paper. ”Couriers and relay horses by land, and swift sailing pilot boats by sea, were flying in all directions,” wrote Jefferson. ”Active partners and agents were a.s.sociated and employed in every state, town, and country neighborhood, and this paper was bought up at 5/ and even as low as 2/ in the pound, before the holder knew Congress had already provided for its redemption at par. Immense fortunes were thus filched from the poor and ignorant, and fortunes acc.u.mulated by those who had themselves been poor enough before.”
[Map: Vote on a.s.sumption July 24, 1790]
The second part of the scheme outlined in Hamilton's first report aroused even more bitter opposition. With a fine audacity he proposed the a.s.sumption of state debts. It is difficult to believe that Hamilton was perfectly ingenuous in stating his reasons for this move. He apprehended, he said, that the States would be hampered in satisfying their creditors because they had surrendered one important source of revenue to the central Government, duties on imports. In resorting to other means, the States might pa.s.s conflicting measures which would oppose industry. Besides, the debts had been incurred in the cause of Union and should be borne by all. But deeper than these reasons was probably a political motive. Hamilton had no local attachments. A thoroughgoing nationalist, he saw in the claims of the States to autonomy only so many obstacles in the path of national unity. ”To cement more closely the Union of States” by creating a solidarity of financial interests, was, indeed, the basal principle of his fiscal plans.
The wrath of Congressmen from States like Virginia, which had already discharged most of their debts, knew no bounds. After they had practiced thrift and met their obligations, should they, forsooth, now aid their less provident sisters? The chief opponents of a.s.sumption came from the South, and the chief advocates from the North. South Carolina and New Hamps.h.i.+re parted company with their neighbors, the one because it had a large debt and the other because it had not. Pennsylvania was divided on this question. For a time the opposition was too strong to be overcome.
On May 25, 1790, an adverse vote seemed to seal the fate of ”Miss a.s.sumption,” as the wits of the day called this measure. Just at this juncture the question of the location of the future capital, which had been debated inconclusively during the first session, was revived. Here again the North was arrayed against the South. Should the capital be located on the Potomac, as Maryland and the Southern States wished, or somewhere in Pennsylvania? New York was now out of the question, and since Pennsylvania would not support a.s.sumption, the New England States rather spitefully opposed the claims of Philadelphia.
Here was a situation which called for the _finesse_ of the politician.
Might not votes for one project be traded for the other? Would the Virginia representatives abandon their opposition to a.s.sumption for the sake of locating the capital on the banks of the Potomac? It was at this juncture that Hamilton sought out Jefferson, whose influence over the Congressmen from Virginia was very considerable, and laid the project before him. With a readiness which he afterward regretted, Jefferson fell in with the scheme, and invited Hamilton and certain Virginia Representatives to dine at his table. In this comfortable fas.h.i.+on, over their wine, these gentlemen reached an amicable agreement. Such is Jefferson's account, but the matter could not have been quite so simple, for other Representatives than those from Virginia changed their votes and so contributed to the final settlement of the controversy. Nor is Jefferson quite ingenuous when he afterward described himself as duped by Hamilton, for he had not shown himself averse to a.s.sumption at any time. Be this as it may, Congress voted to a.s.sume the debts of the States, and to remove the seat of government from Philadelphia after ten years to a district ten miles square on the Potomac, which Was.h.i.+ngton was to select.
The need of further revenue was now imperative. As Hamilton said in his second report on the public credit, the duties on imported articles had reached a point which might not be exceeded ”without contravening the sense of the body of the merchants.” When Congress met for its third session in December, 1790, Hamilton boldly urged what was perhaps as unpopular a tax as he could have proposed--a duty on distilled spirits.
To most Americans an excise was not only an internal tax, but as Jefferson said, ”an infernal one.” It was bound to fall with heavy weight upon the people of the interior who turned much of their corn and rye into whiskey, for more convenient transportation over the mountains to Eastern markets. But despite strenuous opposition the excise was voted. It was, as a member of Congress expressed it, like ”drinking down the national debt.”
In this same report of December 13, 1790, Hamilton advocated the establishment of a national bank. Such an inst.i.tution, he believed, would increase the amount of active capital in the country and at the same time serve the Government as a fiscal agent in obtaining loans and in collecting taxes. Opposition to this project gathered rapidly and was encouraged by the Secretary of State. The debates in Congress touched upon the monopolistic tendency of such a banking inst.i.tution and its const.i.tutionality, rather than upon its intrinsic merits and demerits.
The bill was carried by substantial majorities in February, 1791, and sent to the President for his approval.
Was.h.i.+ngton was so beset with doubts as to the const.i.tutionality of the bank bill that he asked his secretaries and the Attorney-General to express their opinions. Jefferson argued that the power to incorporate a bank was not given by the Const.i.tution to Congress, for it was not among the enumerated powers and it was not a power which belonged to any of the enumerated powers as indispensably necessary to their exercise.
Hamilton deprecated this attempt to confine the general Government either to powers expressly granted or to powers absolutely necessary to carry out the enumerated powers. There was another cla.s.s, he contended, which might be termed ”resulting” powers. If the end to be gained by a measure was comprehended within the specified powers, and the measure was obviously a means to that end and not forbidden by the Const.i.tution, then it was clearly within the compa.s.s of the national authority.
Was.h.i.+ngton finally yielded to Hamilton's persuasions, and signed the bill.
The charter of the bank fixed the capital stock at ten million dollars, of which the Government was to subscribe one fifth; the rest was open to public subscription. Three fourths of the public subscriptions might be paid in bonds of the Government. The notes issued by the bank were made receivable for all payments to the United States. The bank was to be the repository of the government funds. Its management was committed to a board of twenty-five directors chosen annually, who could establish branch banks as they deemed advisable. The charter was to run for twenty years.
The stock of the bank was not only subscribed at once, but soon sold at a premium which invited the wildest sort of speculation in Philadelphia, New York, and Boston. Stock-jobbing became a mania. ”The coffee house is in an eternal buzz with the gamblers,” Madison wrote from the seat of government. Sinister aspects of this speculative craze soon began to appear. ”Of all the shameful circ.u.mstances of this business,” said Madison, ”it is among the greatest to see the members of the Legislature who were most active in pus.h.i.+ng this job openly grasping its emoluments.” It was reported that Schuyler, Hamilton's father-in-law, was to head the board of directors.
As the wide reach of Hamilton's financial policy became clear, men like Madison, whose sympathies had hitherto been enlisted on the side of more efficient government, had grave misgivings. When the Secretary of the Treasury intimated in his report on manufactures that Congress might promote the general welfare by appropriating money in any way it chose, Madison definitely parted company with his former collaborator, holding that by such an interpretation of the Const.i.tution ”the Government is no longer a limited one possessing enumerated powers, but an indefinite one, subject to particular restrictions.” Jefferson had already expressed himself in a similar way apropos of the bank bill. The suspicions which the Secretary of State entertained of his brilliant colleague were deep-seated. Hamilton's well-known preference for the British Const.i.tution and his disposition to convert his secretarys.h.i.+p into a sort of chief ministerial office confirmed Jefferson's distrust.
Had he and Madison been alone in their suspicions, their misgivings would not be worth recording; but they voiced the sentiments of an increasing number of men who disliked the consolidating tendencies of the new Government.
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