Self-Educated American, Classics Library
Alexander Hamilton: The Works of Alexander Hamilton, Volume 1, 1774
Taxation and Finance: Speech on the Revenue System*
There appears to me to have been some confusion in the manner of voting on the two preceding clauses of this bill: the first, for granting the impost to the United States, having been carried by a majority of one; and the last, for making the officers employed in the collection accountable to them, having been lost by a much larger majority. I was induced to hope, from the success of the first question, that the second would have met with equal success, as I presume gentlemen who meant to adhere to the act of the last session would have opposed the whole of the present bill as unnecessary, and those who meant to depart from it would be willing to agree substantially to the system recommended by Congress, as it had been adopted and modified by the other States generally. From the complexion of the votes on the last question, I am obliged to conclude either that I was mistaken in my ideas of the intention of the committee, or that there is some misapprehension, in part, of the members.
It becomes, therefore, necessary—to obviate such misapprehension, if any exists, and to discharge my duty at all events—to lay the subject fully before the committee, and to detail, at large, my reasons for wishing to see the bill, in its present form, prevail.
It is a common practice, in entering upon the discussion of an important subject, to endeavor to conciliate the good-will of the audience to the speaker by professions of disinterestedness and zeal for the public good. The example, however frequent, I shall no further imitate than by making one or two general observations. If, in the public stations I have filled, I have acquitted myself with zeal, fidelity, and disinterestedness; if, in the private walk of life, my conduct has been unstained by any dishonorable act, if it has been uniformly consistent with the rules of integrity, I have a right to the confidence of those to whom I address myself; they cannot refuse it to me without injustice. I am persuaded they will not refuse it to me. If, on the other hand, my public conduct has been in any instance marked with perfidy, duplicity, or with sinister views of any kind; if any imputations, founded in fact, can be adduced to the prejudice of my private character, I have no claim to the confidence of the committee; nor should I expect it.
Even these observations I should have spared myself, did I not know that, in the rage of party, gross calumnies have been propagated. Some I have traced and detected; there may still be others in secret circulation, with which I am unacquainted. Against the influence of such arts I can have no other shield than the general tenor of my past conduct. If that will protect me, I may safely confide in the candor of the committee. To that standard I cheerfully submit.
But, indeed, of what importance is it who is the speaker? ’T is his reasons only that concern the committee; if these are good, they owe it to themselves and to their constituents to allow them their full weight.
The first objection (and that which is supposed to have the greatest force) against the principles of the bill is, that it would be unconstitutional to delegate legislative power to Congress. If this objection be founded in truth, there is at once an end of the inquiry. God forbid that we should violate that constitution which is the charter of our rights. But it is our duty to examine dispassionately whether it really stands in our way. If it does not, let us not erect an ideal barrier to a measure which the public good may require.
The first ground of the objection is deduced from that clause of the constitution which declares “that no power shall be exercised over the people of this State but such as is granted by or derived from them.”
This, it is plain, amounts to nothing more than a declaration of that fundamental maxim of republican government, “that all power, mediately or immediately, is derived from the consent of the people,” in opposition to those doctrines of despotism which uphold the divine right of kings, or lay the foundations of government in force, conquest, or necessity. It does not at all affect the question how far the Legislature may go in granting power to the United States. A power conferred by the representatives of the people, if warranted by the constitution under which they act, is a power derived from the people. This is not only a plain inference of reason, but the terms of the clause itself seem to have been calculated to let in the principle. The words, “derived from,” are added to the words “granted by,” as if with design to distinguish an indirect derivation of power from an immediate grant of it. This explanation is even necessary to reconcile the constitution to itself, and to give effect to all its parts, as I hope fully to demonstrate in its proper place.
The next clause of the constitution relied upon, is that which declares that “the supreme legislative power within this State shall be vested in a Senate and Assembly.” This, it is said, excludes the idea of any other legislative power operating within the State. But the more obvious construction of this clause, and that which best consists with the situation and views of the country at this time, with what has been done before and since the formation of our constitution, and with those parts of the constitution itself which acknowledge the Federal Government, is this: “In the distribution of the different parts of the sovereignty in the particular government of this State, the legislative authority shall reside in a Senate and Assembly”; or, in other words, “the legislative authority of the particular government of the State of New York shall be vested in a Senate and Assembly.” The framers of the constitution could have had nothing more in view than to delineate the different departments of power in our own State government, and never could have intended to interfere with the formation of such a Constitution for the Union as the safety of the whole might require. The justness of this construction will be further elucidated by that part of the constitution which prescribes, “that the supreme executive authority of the State shall be vested in a governor.” If the former clause excludes the grant of legislative power, this must equally exclude the grant of the executive power, and the consequence would be that there could be no Federal Government at all.
It will be of no avail to say, that there is a difference in the two cases in the mode of expression: that, in one, the terms of description are “within the State”; in the other, “of the State.” In grammar, or good sense, the difference in the phrases constitutes no substantial difference in the meaning, or if it does, it concludes against the objection; for the words, within this State, which are applied to the legislative power, have a certain precision that may be supposed to intend a distinction between that legislative power which is to operate within this State only, and that which is to operate upon this State in conjunction with the others. But I lay no stress on this observation. In my opinion the legislative power “within this State” or the legislative power “of this State,” amount in substance to the same thing, and therefore (as has been already observed) if the constitution prohibits the delegation of legislative power to the Union, it equally prohibits the delegation of executive power—and the Confederacy must then be at an end; for without legislative or executive power, it becomes a nullity.
Unfortunately for the objection, if it proves any thing it proves too much. It proves that the powers of the Union in their present form are an usurpation on the constitution of this State. This will appear not only from the reasoning adduced, but from this further consideration,—that the United States are already possessed of legislative as well as executive authority. The objects of executive power are of three kinds: to make treaties with foreign nations, to make war and peace, to execute and interpret the laws. This description of the executive power will enable us the more readily to distinguish the legislative; which in general may be defined the power of prescribing rules for the community.
The United States are authorized to require from the several States as much money as they judge necessary for the general purposes of the Union, and to limit the time within which it is to be raised; to call for such a number of troops as they deem requisite for the common defence in time of war; to establish rules in all cases of capture by sea or land; to regulate the alloy and value of coin, the standard of weights and measures, and to make all laws for the government of the army and navy of the Union. All these are powers of the legislative kind, and are declared by the Confederation to be binding upon all the States.
The first is nothing less than a power of taxing the States in gross, though not in detail; and the last is the power of disposing of the liberty and lives of the citizens of this State, when in arms for the common defence. That the powers enumerated are all, or most of them, of a legislative nature, will not be denied by the law members on the other side of the question. If the constitution forbids the grant of legislative power to the Union, all those authorities are illegal and unconstitutional, and ought to be resumed.
If, on the contrary, those authorities were properly granted, then it follows that the constitution does not forbid the grant of legislative power, and the objection falls to the ground; for there is nothing in the constitution permitting the grant of one kind of legislative authority, and forbidding that of an other. The degree or nature of the powers of legislation which it might be proper to confer upon the Federal Government, would in this case be a mere question of prudence and expediency, to be determined by general considerations of utility and safety.
The principle of the objection under consideration would not only subvert the foundation of the Union as now established, would not only render it impossible that any Federal Government could exist, but would defeat some of the provisions of the constitution itself. This last idea deserves particular attention.
The nineteenth clause makes it the duty of the governor “to correspond with the Continental Congress.” The twentieth provides “that the judges and chancellor shall hold no other office than delegate to the General Congress”; and the thirtieth directs “that delegates to represent this State in the General Congress of the United States of America shall be annually appointed.”
Now, sir, I ask, if Congress were to have neither executive nor legislative authority, to what purpose were they to exist? To what purpose were delegates to be annually appointed to that body? To what purpose were these delegates to represent this State? Or how could they be said to represent it at all?
Is not the plain import of this part of the constitution, that they were to represent this State in the General Assembly of the United States, for the purpose of managing the common concerns of the Union? And does not this necessarily imply that they were to be clothed with such powers as should be found essential to that object? Does it not amount to a constitutional warrant to the Legislature to confer those powers, of whatever kind they might be?
To answer these questions in the negative would be to charge the constitution with the absurdity of proposing to itself and end, and yet prohibiting the means of accomplishing that end.
The words “to represent this State” are of great latitude, and are of themselves sufficient to convey any power necessary to the conduct and direction of its affairs in connection with the other parts of the Confederacy.
In the interpretation of laws it is admitted to be a good rule to resort to the co-existing circumstances, and collect from thence the intention of the framers of the law. Let us apply this rule to the present case.
In the commencement of the Revolution delegates were sent to meet in Congress with large discretionary powers. In short, generally speaking, with full power “to take care of the republic.” In the whole of this transaction the idea of an Union of the colonies was carefully held up. It pervaded all our public acts.
In the Declaration of Independence we find it continued and confirmed. That declaration, after setting forth its motives and causes, proceeds thus: “We, therefore, the representatives of the United States of America in General Congress assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do in the name and by the authority of the good people of these colonies, solemnly publish and declare that these United Colonies are, and of right ought to be, free and independent states; that they are absolved from all allegiance to the British Crown, and that all political connection between them and the state of Great Britain is, and ought to be, totally dissolved; and that, as free and independent states, they have full power to levy war, conclude peace, contract alliances, establish commerce, and do all other acts and things that independent states may of right do.”
Hence we see that the Union and Independence of these States are blended and incorporated in one and the same act; which, taken together, clearly imports that the United States had in their origin full power to do all acts and things which independent states may of right do; or, in other words, full power of sovereignty.
Accordingly, we find that upon the authority of that act, only approved by the several States, they did levy war, contract alliances, and exercise other high powers of sovereignty, even to the appointment of a dictator, prior to the present Confederation.
In this situation, and with this plenitude of power, our constitution knows and acknowledges the United States in Congress assembled, and provides for the annual appointment of delegates to represent this State in that body, which, in substance, amounts to a constitutional recognition of the Union, with complete sovereignty.
A government may exist without any formal organization or precise definition of its powers. However improper it might have been that the Federal Government should have continued to exist with such absolute and undefined authority, this does not militate against the position that it did possess such authority. It only proves the propriety of a more regular formation to ascertain its limits. This was the object of the present Confederation, which is, in fact, an abridgment of the original sovereignty of the Union.
It may be said (for it has been said upon other occasions) that, though the constitution did consider the United States in the light I have described, and left the Legislature at liberty in the first instance to have organized the Federal Government in such a manner as they thought proper, yet that liberty ceased with the establishment of the present Confederacy. The discretion of the Legislature was then determined.
This, upon the face of it, is a subtilty, uncountenanced by a single principle of government, or a single expression of the constitution. It is saying that a general authority given to the Legislature for the permanent preservation and good of the community, has been exhausted and spent by the exercise of a part of that authority. The position is the more destitute of color, because the Confederation, by the express terms of the compact, preserves and continues this power. The last clause of it authorizes Congress to propose, and the States to agree to, such alterations as might be afterward found necessary or expedient.
We see, therefore, that the constitution knows and acknowledges the United States in Congress; that it provides for the annual appointment of delegates to represent this State in that body without prescribing the objects or limits of that representation; that at the time our constitution was framed, the Union existed with full sovereignty; and that therefore the idea of sovereignty in the Union is not incompatible with it. We see, further, that the doctrine contained in the objection against granting legislative power would equally operate against granting executive power, would prove that the powers already vested in the Union are illegal and unconstitutional, would render a confederacy of the States in any form impracticable, and would defeat all those provisions of our own constitution which relate to the United States. I submit it to the committee, whether a doctrine pregnant with such consequences can be true; whether it is not as opposite to our constitution as to the principles of national safety and prosperity; and whether it would not be lamentable if the zeal of opposition to a particular measure should carry us to the extreme of imposing upon the constitution a sense foreign to it, which must embarrass the national councils upon future occasions, when all might agree in the utility and necessity of a different construction.
If the arguments I have used under this head are not well-founded, let gentlemen come forward and show their fallacy. Let the subject have a fair and full examination, and let truth, on whatever side it may be, prevail!
Flattering myself it will appear to the committee that the constitution, at least, offers us no impediment, I shall proceed to other topics of objection. The next that presents itself, is a supposed danger to liberty from granting legislative power to Congress.
But, before I enter upon this subject, to remove the aspersions thrown upon that body, I shall give a short history of some material facts relating to the origin and progress of the business. To excite the jealousies of the people, it has been industriously represented as an undue attempt to acquire an increase of power. It has been forgotten, or intentionally overlooked, that, considering it in the strongest light as a proposal to alter the Confederation, it is only exercising a power which the Confederation has in direct terms reposed in Congress, who, as before observed, are, by the 13th article, expressly authorized to propose alterations.
But so far was the measure from originating in improper views of that body, that, if I am rightly informed, it did not originate there at all. It was first suggested by a convention of the four Eastern States and New York, at Hartford, and, I believe, was proposed there by the deputies of this State. A gentleman on our bench, unconnected with Congress, who now hears me (I mean Judge Hobart), was one of them. It was dictated by a principle which bitter experience then taught us, and which, in peace or war, will always be found true—that adequate supplies to the Federal treasury can never flow from any system which requires the intervention of thirteen deliberatives between the call and the execution.
Congress agreed to the measure, and recommended it. This State complied without hesitation. All parts of the government — Senate, Assembly, and Council of Revision — concurred; neither the constitution nor the public liberty presented any obstacle. The difficulties from these sources are a recent discovery.
So late as the first session of the Legislature, after the evacuation of this city, the governor of the State, in his speech to both Houses, gave a decided countenance to the measure. This he does, though not in expressed terms, yet by implications not to be misunderstood.
The leading opponents of the impost, of the present day, have all of them, at other times, either concurred in the measure, in its most exceptionable form, and without the qualifications annexed to it by the proposed bill, or have, by other instances of conduct, contradicted their own hypothesis on the constitution, which professedly forms the main prop of their opposition.
The honorable member in my eye, at the last session, brought in a bill for granting to the United States the power of regulating the trade of the Union. This surely includes more ample legislative authority than is comprehended in the mere power of levying a particular duty. It indeed goes to a prodigious extent, much farther than, on a superficial view, can be imagined. Can we believe that the constitutional objection, if well founded, would so long have passed undiscovered and unnoticed? Or, is it fair to impute to Congress criminal motives for proposing a measure which was first recommended to them by five States, or from persisting in that measure, after the unequivocal experience they have had of the total inefficacy of the mode provided in the Confederation for supplying the treasury of the Union?
I leave the answer to these questions to the good sense and candor of the committee, and shall return to the examination of the question, how far the power proposed to be conferred upon Congress would be dangerous to the liberty of the people. And here I ask:
Whence can this danger arise? The members of Congress are annually chosen by the members of the several Legislatures. They come together with different habits, prejudices, and interests. They are, in fact, continually changing. How is it possible for a body so composed to be formidable to the liberties of States—several of which are large empires in themselves?
The subversion of the liberty of the States could not be the business of a day. It would at least require time, premeditation, and concert. Can it be supposed, that the members of a body so constituted would be unanimous in a scheme of usurpation? If they were not, would it not be discovered and disclosed? If we could even suppose this unanimity among one set of men, can we believe that all the new members who are yearly sent from one State or another would instantly enter into the same views? Would there not be found one honest man to warn his country of the danger?
Suppose the worst—suppose the combination entered into and continued. The execution would at least announce the design; and the means of defence would be easy. Consider the separate power of several of these States, and the situation of all. Consider the extent, populousness, and resources of Massachusetts, Virginia, Pennsylvania; I might add, of New York, Connecticut, and other States. Where could Congress find means sufficient to subvert the government and liberties of either of these States? or, rather, where find means sufficient to effect the conquest at all? If an attempt was made upon one, the others, from a sense of common danger, would make common cause; and they could immediately unite and provide for their joint defence.
There is one consideration, of immense force in this question, not sufficiently attended to. It is this—that each State possesses in itself the full powers of government, and can at once, in a regular and constitutional way, take measures for the preservation of its rights. In a single kingdom or state, if the rulers attempt to establish a tyranny, the people can only defend themselves by a tumultuary insurrection; they must run to arms without concert or plan; while the usurpers, clothed with the forms of legal authority, can employ the forces of the State to suppress them in embryo, and before they can have time or opportunity to give system to their opposition. With us, the case is widely different. Each State has a government, completely organized in itself, and can at once enter into a regular plan of defence; with the forces of the community at its command, it can immediately form connections with its neighbors, or even with foreign powers, if necessary.
In a contest of this kind, the body of the people will always be on the side of the State governments. This will not only result from their love of liberty and regard to their own safety, but from other strong principles of human nature. The State governments operate on those immediate familiar personal concerns to which the sensibility of individuals is awake. The distribution of private justice belonging to them, they must always appear to the senses of the people as the immediate guardians of their rights. They will, of course, have the strongest hold on their attachment, respect, and obedience. Another circumstance will contribute to the same end. Far the greatest number of offices and employments are in the gift of the States separately; the weight of official influence will therefore be in favor of the State governments; and, with all these advantages, they cannot fail to carry the people along with them in every contest with the General Government in which they are not palpably in the wrong, and often when they are. What is to be feared from the efforts of Congress to establish a tyranny, with the great body of the people, under the direction of their State governments, combined in opposition to their views? Must not their attempts recoil upon themselves, and terminate in their own ruin and disgrace? or, rather, would not these considerations, if they were insensible to other motives, for ever restrain them from making such attempts?
The causes taken notice of, as securing the attachment of the people to their local governments, present us with another important truth—the natural imbecility of federal governments, and the danger that they will never be able to exercise power enough to manage the general affairs of the Union; though the States will have a common interest, yet they will also have a particular interest. For example: as a part of the Union, it will be the interest of every State to pay as little itself, and to let its neighbors pay as much as possible. Particular interests have always more influence upon men than general. The Federal States, therefore, consulting their immediate advantage, may be considered as so many eccentric powers, tending in a contrary direction to the government of the Union; and as they will generally carry the people along with them, the Confederacy will be in continual danger of dissolution. This, Mr. Chairman, is the real rock upon which the happiness of this country is likely to split. This is the point to which our fears and cares should be directed, to guard against this, and not to terrify ourselves with imaginary dangers from the spectre of power in Congress, will be our true wisdom.
But let us examine a little more closely the measure under consideration. What does the bill before us require us to do? Merely to grant duties on imposts to the United States, for the short period of twenty-five years; to be applied to the discharge of the principal and interest of the debts contracted for the support of the late war; the collection of which duties is to be made by officers appointed by the State, but accountable to Congress, according to such general regulations as the United States shall establish, subject to these important checks: that no citizen shall be carried out of the State for trial; that all prosecutions shall be in our own courts; that no excessive fines or penalties shall be imposed; and that a yearly account of the proceeds and application of the revenue shall be rendered to the Legislature, on failure of which it reserves to itself a right of repealing its grant.
It is possible for any measure to be better guarded? or is it possible that a grant for such precise objects, and with so many checks, can be dangerous to the public liberty?
Having now, as I trust, satisfactorily shown that the constitution offers no obstacle to the measure, and that the liberty of the people cannot be endangered by it, it remains only to consider it in the view of revenue.
The sole question left for discussion is, whether it be an eligible mode of supplying the Federal treasury or not.
The better to answer this question, it will be of use to examine how far the mode by quotas and requisitions has been found competent to the public exigencies.
The universal delinquency of the States during the war shall be passed over with the bare mention of it. The public embarrassments were a plausible apology for that delinquency; and it was hoped the peace would have produced greater punctuality. The experiment has disappointed that hope to a degree which confounds the least sanguine. A comparative view of the compliances of the several States for the five last years will furnish a striking result.
During that period, as appears by a statement on our files, New Hampshire, North Carolina, South Carolina, and Georgia have paid nothing. I say nothing, because the only actual payment is the trifling sum of about $7,000 by New Hampshire. South Carolina indeed has credits, but these are merely by way of discount on the supplies furnished by her during the war, in consideration of her peculiar sufferings and exertions while the immediate theatre of it.
Connecticut and Delaware have paid about one third of their requisitions; Massachusetts, Rhode Island, and Maryland, about one half; Virginia about three fifths; Pennsylvania nearly the whole; and New York more than her quota.
These proportions are taken on the specie requisitions; the indents have been very partially paid, and in their present state are of little account.
The payments into the Federal treasury have declined rapidly each year. The whole amount for three years past, in specie, has not exceeded $1,400,000, of which New York has paid 100 per cent. more than her proportion. This sum, little more than $400,000 a year, it will readily be conceived, has been exhausted in the support of the civil establishments of the Union, and the necessary guards and garrisons of public arsenals, and on the frontiers; without any surplus for paying any part of the debt, foreign or domestic, principal or interest.
Things are continually growing worse; the last year in particular produced less than two hundred thousand dollars, and that from only two or three States. Several of the States have been so long unaccustomed to pay, that they seem no longer concerned even about the appearances of compliance.
Connecticut and Jersey have almost formally declined paying any longer. The ostensible motive is the non-concurrence of this State in the impost system. The real one must be conjectured from the fact.
Pennsylvania, if I understand the scope of some late resolutions, means to discount the interest she pays upon her assumption to her own citizens; in which case there will be little coming from her to the United States. This seems to be bringing matters to a crisis.
The pecuniary support of the Federal Government has of late devolved almost entirely upon Pennsylvania and New York. If Pennsylvania refuses to continue her aid, what will be the situation of New York? Are we willing to be the Atlas of the Union? or are we willing to see it perish?
This seems to be the alternative. Is there not a species of political knight-errantry in adhering pertinaciously to a system which throws the whole weight of the Confederation upon this State, or upon one or two more? Is it not our interest, on mere calculations of State policy, to promote a measure which, operating under the same regulations in every State, must produce an equal, or nearly equal, effect everywhere, and oblige all the States to share the common burthen?
If the impost is granted to the United States, with the power of levying it, it must have a proportionate effect in all the States, for the same mode of collection everywhere will have nearly the same return everywhere.
What must be the final issue of the present state of things? Will the few States that now contribute be willing to contribute much longer? Shall we ourselves be long content with bearing the burthen singly? Will not our zeal for a particular system soon give way to the pressure of so unequal a weight? And if all the States cease to pay, what is to become of the Union? It is sometimes asked: Why do not Congress oblige the States to do their duty? But where are the means? Where are the fleets and armies, where the Federal treasury to support those fleets and armies, to enforce the requisitions of the Union? All methods short of coercion, have repeatedly been tried in vain.
Let us now proceed to another most important inquiry. How are we to pay our foreign debt? This, I think, is estimated at about $7,000,000, which will every year increase with the accumulations of interest. If we pay neither principal nor interest, we not only abandon all pretensions to character as a nation, but we endanger the public peace. However it may be in our power to evade the just demands of our domestic creditors, our foreign creditors must and will be paid.
They have power to enforce their demands, and sooner or later they may be expected to do it. It is not my intention to endeavor to excite the apprehensions of the committee, but I would appeal to their prudence. A discreet attention to the consequences of national measures is no impeachment of our firmness.
The foreign debt, I say, must sooner or later be paid, and the longer provision is delayed the heavier it must fall at last.
We require about 1,600,000 dollars to discharge the interest and instalments of the present year, about a million annually upon an average, for ten years more, and about 300,000 dollars for another ten years.
The product of the impost may be computed at about a million of dollars annually. It is an increasing fund. This fund would not only suffice for the discharge of the foreign debt, but important operations might be ingrafted upon it towards the extinguishment of the domestic debt.
Is it possible to hesitate about the propriety of adopting a resource so easy in itself and so extensive in its effects?
Here I expect I may be told there is no objection to employing this resource. The act of the last session does it. The only dispute is about the mode. We are willing to grant the money, but not the power required from us. Money will pay our debts; power may destroy our liberties.
It has been insinuated that nothing but a lust of power would have prevented Congress from accepting the grant in the shape it has already passed the Legislature. This is a severe charge. If true, it ought undoubtedly to prevent our going a step further. But it is easy to show that Congress could not have accepted our grant without removing themselves further from the object than they now are. To gain one State they must have lost all the others. The grants of every State are accompanied with a condition that similar grants be made by the other States. It is not denied that our act is essentially different from theirs. Their acts give the United States the power of collecting the duty; ours reserves it to the State, and makes it receivable in paper-money.
The immediate consequences of accepting our grant would be a relinquishment of the grants of other States. They must take the matter up anew, and do the work over again to accommodate it to our standard. In order to anchor one State, would it have been wise to set twelve, or at least eleven others, afloat?
It is said, that the States which have granted more would certainly be willing to grant less. They would easily accommodate their acts to that of New York, as more favorable to their own power and security.
But would Massachusetts and Virginia, which have no paper-money of their own, accede to a plan that permitted other States to pay in paper while they paid in specie? Would they consent that their citizens should pay twenty shillings in the pound, while the citizens of Rhode Island paid only four, the citizens of North Carolina ten, and of other States in different degrees of inequality, in proportion to the relative depreciation of their paper? Is it wise, in this State, to cherish a plan that gives such an advantage to the citizens of other States over its own?
The paper-money of the State of New York, in most transactions, is equal to gold and silver; that of Rhode Island is depreciated to five for one; that of North Carolina to two for one; that of South Carolina may perhaps be worth fifteen shillings in the pound.
If the States pay the duties in paper, is it not evident that for every pound of that duty consumed by the citizen of New York he would pay twenty shillings, while the citizen of South Carolina would pay fifteen shillings; of North Carolina, ten shillings; and Rhode Island, only four!
This consideration alone is sufficient to condemn the plan of our grant of last session, and to prove incontestably that the States which are averse to emitting a paper currency, or have it in their power to support one when emitted, would never come into it.
Again, would those States which by their public acts demonstrate a conviction that the powers of the Union require augmentation; which are conscious of energy in their own administration—would they be willing to concur in a plan which left the collection of the duties in the hands of each State; and of course subject to all the inequalities which a more or less vigorous system of collection would produce?
This too is an idea which ought to have great weight with us. We have better habits of government than are to be found in some of the States; and our constitution admits of more energy than the constitution of most of the other States. The duties, therefore, would be more effectually collected with us than in such States, and this would have a similar effect to the depreciation of the money, in imposing a greater burthen on the citizens of this State.
If any State should incline to evade the payment of the duties, having the collection in its own hands, nothing would be easier than to effect it, and without materially sacrificing appearances.
It is manifest, from this view of the subject, that we have the strongest reasons, as a State, to depart from our own act; and that it would have been highly injudicious in Congress to have accepted it.
If there even had been a prospect of the concurrence of the other States in the plan, how inadequate would it have been to the public exigencies, fettered with the embarrassments of a depreciating paper!
It is to no purpose to say, that the faith of the State was pledged by the act to make the paper equal to gold and silver; and that the other States would be obliged to do the same. What greater dependence can be had on the faith of the States pledged to this measure, than on the faith they pledged in the Confederation sanctioned by a solemn appeal to heaven? If the obligation of faith in one case has had so little influence upon their conduct in respect to the requisitions of Congress, what hope can there be that they would have greater influences in respect to the deficiencies of the paper-money?
There yet remains an important light in which to consider the subject in the way of revenue. It is a clear point that we cannot carry the duties upon imports to the same extent by separate arrangements as by a general plan—we must regulate ourselves by what we find done in the neighboring States: while Pennsylvania has only two and a half per cent. on her importations, we cannot greatly exceed her. To go much beyond it would injure our commerce in a variety of ways, and would defeat itself. While the ports of Connecticut and Jersey are open to the introduction of goods free from duty, and the conveyance from them to us is so easy—while they consider our imposts as an ungenerous advantage taken of them, which it would be laudable to elude, the duties must be light or they would be evaded. The facility to do it, and the temptation of doing it, would be both so great, that we should collect perhaps less by an increase of the rates than we do now. Already we experience the effects of this situation. But if the duties were to be levied under a common direction, with the same precautions everywhere to guard against smuggling, they might be carried without prejudice to trade to a much more considerable height.
As things now are, we must adhere to the present standard of duties, without any material alterations. Suppose this to produce fifty thousand pounds a year. The duties to be granted to Congress ought, in proportion, to produce double that sum. To this it appears, by a scheme now before us, that additional duties might be imposed for the use of the State, on certain enumerated articles, to the amount of thirty thousand pounds. This would be an augmentation of our national revenue by indirect taxation to the extent of eighty thousand pounds a year, an immense object in a single State, and which alone demonstrates the good policy of the measure.
It is no objection to say that a great part of this fund will be dedicated to the use of the United States. Their exigencies must be supplied in some way or other. The more is done towards it by means of the impost, the less will be to be done in other modes. If we do not employ that resource to the best account, we must find others in direct taxation. And to this are opposed all the habits and prejudices of the community. There is not a farmer in the State who would not pay a shilling in the voluntary consumption of articles on which a duty is paid, rather than a penny imposed immediately on his house and land.
There is but one objection to the measure under consideration that has come to my knowledge, which yet remains to be discussed. I mean the effect it is proposed to have upon our paper currency. It is said the diversion of this fund would leave the credit of the paper without any effectual support.
Though I should not be disposed to put a consideration of this kind in competition with the safety of the Union, yet I should be extremely cautious about doing any thing that might affect the credit of our currency. The Legislature having thought an emission of paper advisable, I consider it my duty as a representative of the people to take care of its credit. The farmers appeared willing to exchange their produce for it; the merchants on the other hand had large debts outstanding. They supposed that giving a free circulation to the paper would enable their customers in the country to pay, and as they perceived that they would have it in their power to convert the money into produce, they naturally resolved to give it their support.
These causes combined to introduce the money into general circulation, and having once obtained credit, it will now be able to support itself.
The chief difficulty to have been apprehended in respect to the paper, was to overcome the diffidence which the still recent experience of depreciating paper had instilled into men’s minds. This, it was to have been feared, would have shaken its credit at its outset, and if it had once begun to sink, it would be no easy matter to prevent its total decline.
The event has, however, turned out otherwise, and the money has been fortunate enough to conciliate the general confidence. This point gained, there need be no apprehensions of its future fate, unless the government should do something to destroy that confidence.
The causes that first gave it credit still operate, and will in all probability continue so to do. The demand for money has not lessened, and the merchant has still the same inducement to countenance the circulation of the paper.
I 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.
* Delivered in the New York Legislature, 1787.
Self-Educated American recommends you supplement this read with Alexander Hamilton, James Madison, and John Jay’s constitutional classic: The Federalist: The Famous Papers on the Principles of American Government
The Works of Alexander Hamilton, ed. Henry Cabot Lodge (Federal Edition) (New York: G.P. Putnam’s Sons, 1904). In 12 vols. The copyright for the original of this document is held in the Public Domain. Font, formatting, spelling modernizations, typo/transcription corrections, and explanatory footnotes for this version of ”The Works of Alexander Hamilton” Copyright © 2011 Steve Farrell and Self-Educated American.