The Oregon Question

But it appears very doubtful whether such a large sum as forty-five millions can be raised annually by loans and Treasury notes. It is necessary in the first place to correct some erroneous opinions respecting the extent to which these notes may be kept in circulation, and the legitimate objects to which they may be applied.

The Treasury notes were first introduced on my suggestion, which was no new discovery, since they are a mere transcript of the Exchequer Bills of Great Britain. As these have been resorted to for more than a century, and have never become there a portion of the ordinary currency, the extent to which they may be used for other purposes is well ascertained, and bears always a certain ratio to the wealth of the country and to the revenue of the State. Whether issued to the bank as an anticipation of the revenue, or used by capitalists for short investments, the gross amount has rarely exceeded twenty millions sterling. Judging from past experience, the amount which may, in time of war, be kept in circulation at par in the United States falls far short of a proportionate sum.

The amount in actual circulation was less than five millions, and thus far they had been kept at par.

All the demands from the other departments had been met by the Treasury, and there were but few, if any, outstanding arrears. Nothing had as yet been collected on account of the direct tax and of the internal duties. Besides the five millions of Treasury Notes, there had been paid into the Treasury in the years 1812 and 1813, $28,740,000 on account of war loans, and $22,283,000 from the customs. The balance in the Treasury amounted to $5,196,542 on the 31st December, 1813.

The amount of Treasury Notes issued during the year 1814 amounted to near eight millions, and there had been paid off during the same year, including interest, $2,700,000; making an addition of about five millions and a half, and the total amount outstanding about ten millions and a half. The receipts during that year, on account of the direct tax and internal duties, amounted to $3,877,000, from war loans to $15,080,000, and from customs to only six millions. Before the end of the year, Government was unable to pay the notes which had become due. It is perfectly clear that, if new notes could not be issued in lieu of those which had become due, it was because they had fallen below par, and therefore that the amount outstanding was greater than the demand for them. There was but one remedy, and it was very simple. A reduction in that amount must be made, by funding at their market price a quantity sufficient to re-establish the equilibrium. But all the banks west of New England had in the meanwhile suspended their specie payments. A period of anarchy in the currency of the country was the consequence, and lasted till those payments were resumed in the year 1817.

The result of the suspension of specie payments in England was, that the notes of the Bank of England became in fact a legal tender and the standard of the currency. All the other banks were obliged to keep their own notes on a par with those of that bank; and all that was necessary in order to prevent a depreciation, was to regulate the issues of the Bank of England, so as to keep them at par with gold and silver. Nevertheless, the clamor for more currency prevailed; the bank found it very convenient and profitable to issue notes which it was not obliged to pay, and these finally depreciated twenty-five per cent. But in the United States the banks were under no other control than that of the several States respectively. The consequence was, that we had fifty and more species of local currencies, varying in value in the different States or districts of country, and from time to time in the same district. The banks might with facility have resumed specie payments during the first year of peace. The efforts of the Secretary of the Treasury to induce them to resume proved unsuccessful; and the resumption did not take place till after a new Bank of the United States had been organized.

We have had two general suspensions of specie payments, the last at a time of profound peace. I was then behind the scenes, had some agency in restoring specie payments, and may speak on that subject with knowledge and confidence. The obstacles came partly from the Banks, principally from the Debtor interest, which excites sympathy and preponderates throughout the United States. The mis-named Bank of the United States, and the banks under its influence, were, it is true, a formidable impediment; and this obstacle is now fortunately removed. Still the continuance of specie payments stands, whenever a crisis occurs, on a most precarious basis; and if any important place, especially New York, happened to break, all the banks through the United States would instantaneously follow the example. This is the most imminent danger to which the Treasury of the United States will be exposed in time of war; and what effect the Sub-Treasury system may produce in that respect remains to be tested by experience.

It is impossible to draw any inference respecting Treasury Notes, from what took place in the United States during the confused state of the currency in the years 1815 and 1816. The taxes were paid everywhere with the cheapest local currency, in Treasury Notes only in the places where specie payments had been continued, or where bank notes were nearly at par. The depreciation of the Treasury Notes was arrested by the fact, that they might at all times be converted into a six or seven per cent. stock; but in that case they became assimilated to a direct loan. They never can become a general currency, on account of their varying value, so long as they bear an interest and are made payable at some future day. In order to give them that character, they should assume that of bank notes, bearing no interest and payable on demand. It does not require the gift of prophecy to be able to assert that, as the wants of Government increased, such notes would degenerate into paper money to the utter ruin of the public credit.

They may, however, be made a special currency for the purpose of paying taxes as gold and silver, and to the exclusion of any other species of paper currency. The amount which might be thus kept in circulation, in addition to that wanted for short investments, would be limited by the gross amount of the annual revenue, and bear but a small proportion to it; since one thousand dollars, in silver or in any paper currency, are sufficient to effect in one year fifty payments of the same amount.

Although the amount kept in circulation may fluctuate according to circumstances, the fundamental principle is, that the issue of such notes is an anticipation of the revenue, which, after it has reached the maximum that may be kept in circulation without being depreciated, never can be increased. Be the amount ten or twenty millions, the anticipation may be continued, but not renewed; it is not an annual resource, but one, the whole amount of which never can exceed that which may be kept in circulation. The operation consists in re-issuing annually the amount which is paid off in the year. Whenever, owing to incidental fluctuations, the amount to be redeemed by the Treasury exceeds that which may be re-issued, the difference must be immediately funded at the market price of the notes, so as to keep them always at par or a little above par.

It is evident, that if the direct tax and internal duties laid in August, 1813, had been imposed in July, 1812; and if the acts of January, 1815, which increased both, had been enacted in August, 1813; there would have been an addition of at least eight millions to the revenue of the years 1812 and 1813; the Treasury Notes which had become due would have been paid, public credit would have been maintained, and the amount of war loans lessened.

The principal causes of the fall of public stocks during a war, and of the consequent necessity of borrowing on dearer terms, are a want of confidence in Government, and the large amount of stocks thrown in the market beyond the natural demand for them. The effect of this last cause is remarkably illustrated by the fluctuations in the price of the stocks of Great Britain, where it does not appear that there ever was a want of confidence in the ability and fidelity of Government in fulfilling its engagements. The British three per cents. are now, and were before the war of American Independence, and before those which had their origin in the French revolution, near par or at par. They fell gradually during the war of independence, and were as low as fifty-four in February, 1782. The long war with France was attended with the same result, and the three per cents. had fallen to fifty-five in July, 1812. Notwithstanding the deranged state of the finances of the United States in 1814, the American stocks had not fallen in the same proportion. Such great depreciation is the result of the long continuance of a war. No one can say what would have been its progress, had the last war with England continued much longer.

There was not, however, at that time, at least in America, any want of confidence in the Government: no one doubted that it would ultimately faithfully discharge all its engagements. Although the General Government is in no way responsible for the errors of any of the individual States, it is nevertheless certain, that the credit of the Union has been injured abroad by the failure of several of the States to fulfil their engagements, and that no expectation can be entertained of being able to borrow money in Europe. It is not less true that the Administration will cease to enjoy the confidence of American capitalists, if the measures it has recommended should be adopted and productive of war. No one can doubt that, if that event should take place, the Americans will fight in defence of their country, and none with greater zeal and bravery than the people of the Western States. During the last war, their militia and volunteers flocked either to the Lakes, to New Orleans, or wherever there was danger; nor did they refuse to take part in offensive operations, and to serve without the limits of the United States. But men cannot, either there or elsewhere, afford to render gratuitous services. Whether regulars, volunteers, or militia, they must be fed, clothed, transported, supplied with arms and artillery, and paid. There is as yet but very little active circulating capital in the new States: they cannot lend; they, on the contrary, want to borrow money. This can be obtained in the shape of loans only from the capitalists of the Atlantic States. A recurrence to public documents will show that all the loans of the last war were obtained in that quarter.

Men of property are perhaps generally more timid than others, and certainly all the quiet people, amongst whom the public stocks are ultimately distributed, are remarkably cautious. Prudent capitalists, who do not speculate, and consider public stocks only as convenient and safe investments, will not advance money to Government so long as it is controlled by men whom they consider as reckless, and as entertaining rather lax opinions respecting public credit. Yet money will be obtained, but on much dearer terms than if public confidence was unimpaired. There will always be found bold speculators, who will advance it at a premium – enhanced by the want of competition, and proportionate to the risks they may be supposed to incur. Independent of this, it is most certain that the rate of interest at which loans may be obtained, will always be increased in proportion to their magnitude. The only ways by which these difficulties may be obviated, or at least lessened, are perfect fidelity in fulfilling the engagements of Government; an economical, that is to say, a skilful application of the public moneys to the most important objects, postponing all those which are not immediately wanted, or are of inferior real utility; and an increase of the amount of revenue derived from taxation. This has the double advantage of diminishing the amount to be borrowed, and of inspiring confidence to the money-lenders. In all cases, direct loans will be preferable to, and prove a cheaper mode of raising money than the over issues of Treasury Notes.

The Act of July, 1812, which doubled the duties on importations, afforded a resource which, on account of the high rate at this time of those duties, cannot now be resorted to. Duties may, however, be levied on the importation of Tea and Coffee, and perhaps some other articles now duty free. Other modifications may be found useful, but it may be difficult to ascertain, even without any regard to protection, what are the rates of duties which should be imposed in time of war on the various imported articles, in order to render the revenue derived from that source as productive as possible.

It must also be observed that if, on account of the credit then allowed for the payment of duties on importations, the Treasury had, when the war of 1812 commenced, a resource in the revenue previously accrued but not yet collected, which does not now exist; on the other hand the United States were still encumbered with a considerable portion of the Revolutionary debt, and the payments on account of its principal and interest amounted during the years 1812, 1813, 1814, to about $11,000,000, whilst the annual interest on the now existing debt is less than one million.

The direct tax of the year 1815 amounted to $6,000,000, and the revenue which accrued during the same year, on the aggregate of internal duties, as increased or imposed at the same time, amounted to about the same sum. That year is also the most proper for a comparative view of the revenue derived from each object. In the subsequent years the revival of business increased the amount derived from the duties connected with the commerce of the country, much beyond that which could be collected in time of war; whilst, on the other hand, the excise on spirits was much less productive. The nett revenue derived from internal duties, which accrued during that year was in round numbers, about

The three last items were those added on Mr. Dallas's recommendation to the first items laid in 1813, but the rate of which was increased, also on his recommendation. The manufactured articles not before taxed on which the new duties were laid were, pig and bar iron, nails; wax and tallow candles; hats, caps and umbrellas; paper and playing cards; leather, saddles, bridles, boots and shoes; beer, ale and porter; snuff, cigars and manufactured tobacco. This was the boldest measure proposed by the Secretary, for these duties were from their nature intrinsically obnoxious. Yet no voice was raised against them; and so far from becoming unpopular, Mr. Dallas, by his courage and frankness, acquired a well-earned popularity. No stronger proof can be adduced of the propriety of telling the whole truth and placing an entire confidence in the people.

The only important measure omitted at that time, was an Act of Congress ordering that all the Treasury notes actually due and not paid should be immediately funded at their nominal value; that is to say, that for every one hundred dollars in Treasury notes, the same amount of funded stock should be issued as it was necessary to give for one hundred dollars in gold or silver. It was impossible to obtain a regular loan in time, and on reasonable terms, for the purpose of defraying the war expenses of the first six months of the year 1815. There was an absolute necessity for recurring to Treasury notes for that purpose, and the attention of the Treasury was forcibly directed to that object. But the first and fundamental element of public credit is the faithful and punctual fulfilment of the public engagements; and the payment of the Treasury notes, when becoming due, was as necessary as that of the interest of the funded debt, which never was suspended during the war. As an immediate and considerable issue of Treasury notes was absolutely necessary, it was not sufficient that they might be convertible into a funded stock, which was already much below par, since that would be in fact an issue of depreciated paper. The Act should, therefore, have pledged the public faith, that if the Treasury notes were not discharged in specie when they became due, they should be funded at their nominal value on the same terms as above stated. Mr. Dallas to great energy united pre-eminent talents, he wanted only experience; and I have no doubt that, had the war continued, he would within six months have adopted that course. If I have alluded here to this subject, it is on account of the primary importance, if placed hereafter in a similar difficult position, of adhering rigorously to those principles respecting the legitimate use of Treasury notes and the punctual discharge of every public engagement, which are absolutely necessary for the maintenance of public credit.

Since a direct tax of six millions could be raised thirty years ago, there can be no difficulty in raising one of nine millions at the very beginning of the war: this must be gradually increased, but would be most heavily felt if beyond eighteen millions. Should an equal sum be raised by internal duties, the annual loans wanted after the first year of the war would be lessened in the same proportion. The following estimate may assist in forming a correct opinion on that subject: —

I have inserted only such articles as were heretofore taxed, and have no means of indicating such other as might be added or preferred; nor must I be understood as recommending any specially, or in reference to the rates of duties to be imposed on any one.

It has been very generally asserted that men of property were averse to the war because the losses and burthens which it must occasion fall exclusively upon them; and that poor men were generally in favor of war, because they had nothing to lose.

It is true that the first great loss, caused by the war, will fall immediately on those interested in the maritime commerce of the United States, either as owners, insurers, or in any way employed in it. Considering the imminent danger to which is exposed the immense amount of American property afloat on every sea, and the certain annihilation, during the war, of the fisheries, of the commerce with Great Britain, and of that with all the countries beyond Cape Horn and the Cape of Good Hope, the American merchants may be alarmed at the prospect of a war, the necessity of which they do not perceive. But if the apprehension of immediate danger is more vividly felt, the calamitous effects of the war on the agricultural interests are not less certain. The price of all the products, of which large quantities are exported, must necessarily fall so low that all the farmers must lessen the amount and with it their income, whilst they must pay dearer for all the articles which they are obliged to purchase. The distinction between rich and poor is vague. The most numerous class in the United States is that of the men who are at the same time owners and cultivators of the soil, and who have but small properties and a very moderate income. Every diminution of this, whether from the want of a market or from any additional tax, is in that and the corresponding class of mechanics, attended with the privation of the necessaries or comforts of life. The really rich, the capitalists who have independent incomes, and are not obliged to engage in any of the active pursuits of life, may, in any calamitous season, accumulate less, or at most, must retrench only some luxuries. Thus the unavoidable losses and burthens which are the consequences of a war, fall with the greatest weight on those who derive their means of existence from the pursuits of industry, and whose industry alone contributes to the increase of the general wealth of the country.

But this is not all. Exclusive of those who, either as contractors, or in some other way, are concerned with the large supplies wanted for the support of the army and navy, there is a class of capitalists who are enriched by the war. These are the money lenders, who shall have been bold enough to take up the public loans: unless indeed it should be intended to break public faith, and, on the return of peace, to question the obligation to pay them, upon the pretence of their enormous profits. What these profits are may be again illustrated by the example of Great Britain.

It has already been seen that, whenever a war is one of long continuance, the British Government may at first borrow at par, and ends by being compelled to sell its stock at the rate of fifty per cent of its nominal value; which gives for the whole of the war loans an average of about 75 per cent. In point of fact that Government received in the year 1812 less than 55 per cent; for the money actually received consisted of bank notes, which had then depreciated twenty per cent; so that the money lenders gave only that which was equivalent to forty-four per cent, in gold or silver, of the nominal value of the stock which they received. Besides receiving the interest on the nominal amount of the stock till the principal shall have been paid, they might shortly after the peace, and may now, receive from ninety-seven per cent to par, in gold or silver, for that same stock for which they gave but forty-four. Thus, assuming the public debt of Great Britain at eight hundred thousand pounds sterling; not only was the whole of that capital destroyed by the wars; not only are the British people subject now, and it would seem for ever, to a burthen of taxes sufficient to pay the interest on that debt; but of the eight hundred millions thus consumed, only six hundred were received by the public, and the other two hundred millions made the rich capitalists, who had advanced the money, still richer.

There is another class of men who may occasionally derive wealth from a war. Privateering consists in robbing of their property unarmed and unresisting men, engaged in pursuits not only legitimate but highly useful. It is nothing more nor less than legalized Piracy. For this the United States are not responsible; and it must be admitted, that the practice of all nations justifies them in resorting to those means, in order to make the enemy feel the calamities of war. But the necessity of resorting to means immoral in themselves affords an irrefragable argument against precipitating the country into war for slight causes, indeed against any war which is not purely in self defence.

It is equally untrue to assert that the poorer class of people, by which must be meant all the laborers, or generally those who live on their wages, have nothing to lose by the war.

In this, and other large cities, for every thousand merchants, or men of capital who may be injured or thrown out of business, there are ten thousand men living on wages, whose employment depends directly or indirectly on the commerce of those cities. The number of common laborers is proportionately less in the purely agricultural districts. But it is evident that in both, a considerable number must be thrown out of employment either by the destruction of commerce, or in consequence of the lessened value and quantity of the agricultural products. And it seems impossible that this should take place without affecting the rate of wages, than which a more afflicting evil could not fall on the community. There is no man of pure and elevated feelings who does not ardently wish, that means could be devised to ameliorate the state of society in that respect, so as that those who live by manual labor should receive a more just portion of the profits, which are now very unequally divided between them and their employers.

But even if the rate of wages was not materially affected, yet when it is said that the poor have nothing to lose by war, it must be because their lives are counted for nothing. Whether militia, regulars, or sailors, the privates, the men who actually fight the battles, are exclusively taken from amongst the poorer classes of society. Officers are uniformly selected from the class which has some property or influence. They indeed risk gallantly their lives, but with the hopes of promotion and of acquiring renown and consideration. According to the present system, at least of the regular army, it is extremely rare, almost impossible that a private soldier should ever rise to the rank of an officer. In the course of a war thousands are killed, more die of diseases, and the residue, when disbanded, return home with habits unfavorable to the pursuits of industry. And yet it is asserted that they are predisposed for war, because they have nothing to lose.

As yet, however, we have had recourse only to voluntary enlistments for raising a regular force; the pay or bounties must be increased in order to obtain a sufficient number; and thus far to become a private soldier has been a voluntary act. The calling of militia into actual service is a modified species of conscription, and it has also been deemed a sufficient burthen to limit the time of that service to six months. Another plan is now contemplated by those who are so eager to plunge the country into a war. Fearing that the sufficient number of men may not be voluntarily raised, they propose that the militia should be divided into two portions; those belonging to the first class shall, if called into actual service, be bound to serve twelve months instead of six; and the other portion shall be liable to furnish a number of recruits for the army, not exceeding one tenth part of their total number. This last provision seems to be borrowed from the Russian military code. The Emperor of Russia requires each village to supply him with a certain number of men, in proportion to that of the male population. In time of war he requires, at the rate of three men for each hundred males, which answers nearly to that of ten for every one hundred men enrolled in the militia; and he also grants to the serfs the same privilege intended to be allowed to a portion of the militia by the new project, that of selecting the recruits amongst themselves.

If it be any consolation, it is certain that, although we may not invade England, the evils arising from the war will be as sensibly and more permanently felt by Great Britain than by the United States. Her efforts must be commensurate with those of the United States, much greater by sea in order to be efficient, in every respect more expensive on account of her distance from the seat of war. Such is the rapidly progressive state of America, that the industry of the people will, in a few years of peace, have repaired the evils caused by the errors of Government. England will remain burthened with additional debt and taxation.

An aged man, who has for the last thirty years been detached from party politics, and who has now nothing whatever to hope or to fear from the world, has no merit in seeking only the truth and acting an independent part. But I know too well, and have felt too much the influence of party feeling, not to be fully aware that those men will be entitled to the highest praise, who, being really desirous of preserving peace, shall on this momentous occasion dare to act for themselves, notwithstanding the powerful sympathies of party. Yet no sacrifice of principles is required: men may remain firmly attached to those on which their party was founded and which they conscientiously adopted. There is no connexion between the principles or doctrines on which each party respectively was founded, and the question of war or peace with a foreign nation which is now agitated. The practice which has lately prevailed to convert every subject, from the most frivolous to the most important, into a pure party question, destroys altogether personal independence, and strikes at the very roots of our institutions. These usages of party, as they are called, make every man a slave, and transfer the legitimate authority of the majority of the nation to the majority of a party, and, consequently, to a minority of the sovereign people. If it were permitted to appeal to former times, I would say that, during the six years that I had the honor of a seat in Congress, there were but two of those party meetings, called for the purpose of deliberating upon the measures proper to be adopted. The first was after the House had asserted its abstract right to decide on the propriety of making appropriations necessary to carry a treaty into effect, whether such appropriations should be made with respect to the treaty with England of 1794. The other was in the year 1798, respecting the course proper to be pursued after the hostile and scandalous conduct of the French Directory. On both occasions we were divided; and on both the members of the minority of each meeting were left at full liberty to vote as they pleased, without being on that account proscribed or considered as having abandoned the principles of the party. This, too, took place at a time when, unfortunately, each party most erroneously suspected the other of an improper attachment to one or the other of the great belligerent foreign nations. I must say that I never knew a man belonging to the same party as myself, and I have no reason to believe that there was any in the opposite party, who would have sacrificed the interests of the country to those of any foreign power. I am confident that no such person is to be found now in our councils or amongst our citizens; nor am I apt to suspect personal views, or apprehensive of the effect these might produce. My only fear is that which I have expressed, the difficulty for honorable men to disenthral themselves from those party sympathies and habits, laudable and useful in their origin, but which carried to excess become a tyranny, and may leave the most important measures to be decided in the National Councils by an enthusiastic and inflamed minority.

notes

1

I allude here only to the compromise proposed by Great Britain. Her actual claim, as explicitly stated by herself, is to the whole territory, limited to a right of joint occupancy, in common with other States, leaving the right of exclusive dominion in abeyance.

2

Grotius, however, sustains the right of occupation by a maxim of the Civil Roman Code.

3

Estimated for 1812.