[19] "He smote the rock of the national resources and abundant streams of revenue gushed forth. He touched the dead corpse of the public credit, and it sprang upon its feet. The fabled birth of Minerva from the brain of Jove was hardly more sudden or more perfect than the financial system of the United States, as it burst forth from the conceptions of Alexander Hamilton."--_Daniel Webster._

The condition of things at the period we are considering was such as to promise the greatest advantages from the simplest, though persevering and well-considered, employment of the means then for the first time placed at the disposal of the General Government.

If it had fortunately so happened that General Washington had placed Hamilton at the head of the State Department, in which the theories which he appears to have studied from his earliest manhood--he having, though anonymously, at the age of twenty-three, sent to Robert Morris, then a member of Congress, the first plan for a bank of the United States, accompanied by an elaborate examination into monetary and financial affairs generally, and those of the United States in particular--would not have been called into action, and if he had appointed Madison to be Secretary of the Treasury, the fate of his administration and the effects of its measures in respect to parties would have been very different. The practical character of Madison"s talents and disposition had been exemplified in the whole of his previous career, and was conspicuous in his course on the subject of revenue. On the second day after the votes for President and Vice-President under the new Const.i.tution had been canva.s.sed, and twenty days before the inauguration of President Washington, he commenced operations in the new House of Representatives, of which he was a member, to enable the new government to avail itself of the advantages secured to it by the Const.i.tution in regard to revenue.

To this end he introduced a bill to impose impost and tonnage duties by which he believed all the objects of a national revenue could be secured without being oppressive to the country, and pursued his object day in and day out, until his bill became a law. A prompt application of the means thus acquired to the regular payment of the interest on the public debt, with a resort to others authorized in express terms by the Const.i.tution if the impost had not proved adequate to all the objects of a national revenue, as he believed it would, and a discreet use of the power to borrow exerted in the ordinary way, accompanied by proper efforts to keep public expenditures at the lowest point consistent with an efficient public service, would in all probability have been the sum of the measures which Mr. Madison would have deemed necessary to place the public credit at the highest desirable point and to discharge all the existing obligations of the Government. They const.i.tute all the means employed by the department now, and for several years past have proved abundantly sufficient to meet infinitely higher responsibilities, and there is in truth no conclusive reason to be found in the history of the period referred to why they would not have performed the same offices then.

But these simple and usually efficacious measures did not come up to Hamilton"s standard. They fell short of what he thought necessary to the actual wants of the public service, and still more so in regard to what he deemed due to the efficiency, stability, and dignity of the Government. To secure all of these objects he desired to build up a financial system which would approach to an equality with the English model after which he designed to construct it; and he believed that it was in that way only that the public necessities could be amply provided for, the public credit placed at the point which he wished it to occupy, and the respectability of the Government be properly consulted. But this plan required the adoption of measures which, it is not too much to say, he knew that neither those who framed nor those who adopted the Const.i.tution intended to authorize. This difficulty, which to ordinary minds would have appeared insurmountable, was overcome by a device either of his own creation or, as I have for many years believed, the suggestion of another.

The subject of internal improvements by the Federal Government, in regard as well to the power of the latter over the subject as to the expediency of its exercise, was repeatedly and very fully discussed in Congress, whilst Mr. Rufus King and myself represented the State of New York in the Senate of the United States. Upon the question of power we concurred in opinion, he adhering to that of Hamilton--the construction of such works being one of the very few powers which the latter did not claim for the Federal Government. Notwithstanding this agreement the subject was often canva.s.sed between us in respect to the arguments advanced, from time to time, in Congress, by others. On one of those occasions, he told me that on Gouverneur Morris"s visit to the city of New York, soon after his return from the Federal Convention, he was congratulated by his friends on the circ.u.mstance that the Convention had succeeded in agreeing upon a Const.i.tution which would realize the great object for which it had been convened, and that Morris promptly and, as Mr. King seemed to have understood it, significantly replied--"_That will depend upon the construction that is given to it!_" Mr. King did not state any inference he had drawn from the remark and seemed to me indisposed to prolong the conversation upon that point, and, knowing his habitual reserve in speaking of his old a.s.sociates, I yielded to what I believed to be his wish not to be questioned, although I was at the moment strongly impressed by the observation. I referred to it afterwards in a speech I made in the Senate upon the powers of the Government, which was extensively published. At a subsequent period this ready answer of Morris would not have attracted notice; but spoken before even a single officer had been elected to carry the Const.i.tution into effect, and of course before any question as to its construction had arisen, it was to my mind, and, as I believe, to the mind of Mr.

King, evidence of a foregone conclusion to claim under that instrument powers not antic.i.p.ated by the great body of those who framed it, or by those who had given it vitality by their approval. The facts that this reply had been so long remembered by Mr. King, a prominent and sagacious member of the Convention, and repeated under the circ.u.mstances I have detailed, were calculated to create such an impression. It gave, at least to my view, a decided direction in respect to the source from whence the doctrine of _implied powers_ originated. I had found it difficult, with the opinions I had formed of Hamilton"s character and dispositions, to reconcile the first suggestion of such a policy with them. I could believe that, in accordance with the principles which he avowed, he might be not unwilling to carry it into effect when it was suggested to him; but that, after advancing his opinions in a manner so frank and fearless, notwithstanding their well understood unpopularity, he should be found mousing over the words of the Const.i.tution for equivocal expressions, containing a meaning intelligible only to the initiated, and by such methods preparing to spring a trap upon the people, was, it appeared to me, utterly foreign to his nature and habits. Neither was I disposed to believe that he would, at the very moment of signing, have denounced the Const.i.tution as inadequate to the purposes of good government if he had then regarded it as possessing the very extensive powers he afterwards a.s.sisted in claiming for it, nor would he have subsequently declared it to be "a frail and worthless fabric." His complaint upon the latter occasion would have been against the construction that had been given to it, and not against the Const.i.tution itself.

Morris, whose ability no one will question, was a constant attendant upon the Convention, took an active part in its proceedings throughout, was on most of its committees and the _working-man_ of the last,--the duties of which were "to revise the style of, and arrange the articles which had been agreed to by the House,"--and the second and last draft of the Const.i.tution was reported by him. But it is now comparatively unimportant with whom the lat.i.tudinarian construction of the Const.i.tution, which has caused so much strife and contention and so little advantage to any person, party, or interest, originated.

Hamilton, at least, adopted it as the corner-stone of his const.i.tutional views, and, by his genius and the weight of his official influence, gave it a temporary success.

For reasons which will appear in the sequel, I will confine myself to a simple statement of the questions that were raised in respect to the construction of the Const.i.tution, and a few ill.u.s.trations of their character. That instrument, as has already been stated, contained a specific enumeration of the powers given to Congress, and the reasons have been also described for this particularity. The measures to which they referred were known by appropriate and distinct names, and applied to definite and well understood objects, and they have been ever since known and understood as they were then. This enumeration of the powers of Congress was followed, as we have seen, by a grant of authority to that body to "make all laws which shall be necessary and proper for carrying into execution the foregoing powers."

Under this winding-up clause of the Const.i.tutional enumeration of the powers of Congress, the true sense and object of which was so easy to be understood, Hamilton claimed for that body the power of authorizing by law measures of a substantive character, described by well understood names, altogether different from those employed in the enumeration, such as the incorporation of banks, &c., &c., if Congress should declare itself of the opinion that the execution of the enumerated powers would be materially aided by any such measures, reserving to Congress the right of deciding whether the proposed measure would be sufficiently useful to create the "propriety and necessity" required by the Const.i.tution, and placing in its breast alone the final decision of every such question.

The objects of the Const.i.tution, as set forth in its preamble, were "to form a more perfect union, establish justice, insure domestic tranquillity, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity." The first of the powers of Congress, contained in the enumeration of them in the Const.i.tution, is in the following words:

"The Congress shall have power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, and imposts, and excises shall be uniform throughout the United States;"--and then follow all the other powers, to borrow money, &c.

The terms "common defense and general welfare," used in this enumeration, were taken from the Articles of Confederation, where they stood thus: "All charges of war, and all other expenses that shall be incurred for the _common defense and general welfare_, and allowed by the United States, in Congress a.s.sembled, shall be defrayed out of a common treasury, which shall be supplied by the several States in proportion," &c. Under those Articles they were never understood as a substantive grant of power to the Continental Congress, or as authorizing that body to ask from the States moneys, and to expend them for any purposes other than those which the Articles afterwards specified. By the new Const.i.tution the manner of getting the money was happily changed from State requisitions to taxes, duties, imposts, and excises, to be expended, however, when so obtained, for the common defense and general welfare, as before, and the Const.i.tution then, like the Articles of Confederation, says upon what objects it is to be expended. The Convention which framed and those which ratified the instrument, of course, understood the terms as used in the same sense.

But after the Const.i.tution was ratified, without an intimation of such a construction having been whispered before, it was contended by many that the manner in which the terms common defense and general welfare were used in it authorized Congress to adopt _any measure_ which that body might deem calculated to subserve the common defense and general welfare of the country, whilst others, less reckless, limited the power they claimed for Congress to the application of money to any such measures. Among the former, as to the clause in the preamble, Hamilton placed himself, insisting that, under the grant of powers to make all laws which shall be necessary and proper for carrying its given powers into execution, Congress had the power to adopt every measure of government not expressly denied to it or exclusively granted to the States, which it should deem useful in the execution of its enumerated powers, however variant in its name, object, and general understanding; and under the clause quoted from the preamble an unlimited power of taxation, and an equally unlimited authority to expend the money so raised upon objects which it might think would promote the common defense and general welfare. He thus claimed for Congress substantially all legislative power, save such as was expressly prohibited to it, given exclusively to the States, or denied to both, falling but little if any thing short of the power he a.s.signed to the national legislature in his propositions submitted to the Convention, which that body would not even consider, viz.: "to pa.s.s all laws which they shall judge necessary to the common defense and general welfare of the Union."

When the advocates of these doctrines were asked to remember the state of public opinion at the time when the Const.i.tution was framed; the jealousy which then existed and had for so many years existed, of the power of the General Government; the fact that the apprehensions which had been entertained had so long prevented the calling of a Convention; the extreme improbability that the Convention, under such circ.u.mstances, could have intended to give to Congress the power to pa.s.s any law it might be pleased to regard as useful in the execution of an enumerated power, whatever might be its bearing upon the State governments; to add to the power to make peace and war and to raise armies and equip fleets; to make the power to raise money unlimited by authorizing its expenditure upon any measure Congress might a.s.sume to be conducive to the common defense and general welfare, and the absurdity of the supposition that the grant of such far-reaching and absorbing powers would have been conferred in so obscure a way, and that the Const.i.tution would have pa.s.sed the scrutiny of so many State Conventions without its ever having been intimated in any way that there lay concealed in its general terms grants of power which, if but suspected, would have set the country in a blaze, and would have produced instant refusals to ratify on the part of most of the States,--when such considerations were opposed to those bold pretensions, the only reply was, the Const.i.tution must be construed by its letter, and we cannot look behind it or beside it for the means of doing so truly.

To the answer that extraneous matter has always been allowed by all laws, state and national, to be used in the interpretation of the highest acts of sovereignty, such as the construction of treaties between sovereign powers, of patents issued under the great seal, of acts of Parliament, of Congress, and of State legislatures, and in respect to the latter cla.s.s the old law, the mischief and the proposed remedy to be taken into consideration in searching for the meaning of such acts, in the construction of wills, deeds, &c., &c., the only rejoinder was that a Const.i.tution was an exception to those rules; in short that a Const.i.tution was the sole exception to the application of the maxim which has grown out of the observation and experience of mankind,--_qui haeret in litera haeret in cortice_.

The nearness of the time when the Const.i.tution was framed to the period of which we are speaking gave to this construction its most repulsive aspect. The members of the Federal Convention were yet on the stage of action, and many of them partic.i.p.ators in the measures that were brought forward on the strength of it. The remonstrances of those who dissented on the ground of their own knowledge that the Convention did not contemplate such a construction were disregarded, not because they did not represent the truth but because the objection was inadmissible upon principle. This was emphatically the case in respect to the establishment of a national bank, the pioneer of const.i.tutional infractions, the "wooden horse" from whose sides the most violent a.s.saults have been made upon the Const.i.tution. It was a fact well remembered by the members, and subsequently confirmed by the publication of the journal of the Convention, that a motion was made to give to Congress power to grant acts of incorporation, as facilities to public improvements. This fact was brought to the notice of President Washington by Mr. Jefferson, in his opinion upon the bank question: "It is known," said he, "that the very power now proposed as _a means_ was rejected _as an end_ by the Convention which formed the Const.i.tution; a proposition was made to them to authorize Congress to open ca.n.a.ls, and an amendatory one to empower them to incorporate, but the whole was rejected, and one of the reasons of rejection urged in the debate was that then they would have power to erect a bank, which would render the great cities, where there were prejudices or jealousies upon this subject, adverse to the reception of the Const.i.tution."

This communication was made directly to General Washington, who had been President of the Convention, and made to defeat a measure of Hamilton"s, who never failed to turn every proposition of his opponents against themselves when it was in his power to do so. It remained unnoticed, and its truth was therefore virtually admitted. Upon the very first question, then, which arose under the Const.i.tution upon Hamilton"s construction, and that one first also in importance, the well-known intentions of the Convention were directly and intentionally overruled.

President Washington gave no reasons for his decision in favor of the Bank Bill. I will hereafter state the principle upon which I think it fair to presume that he acted. Hamilton was influenced by views which governed his conduct in every const.i.tutional question that arose in his day. He did not, because he could not with any show of propriety, deny that the Const.i.tution ought in strictness to be construed according to the intentions of those who made it; but believing, doubtless sincerely, from the beginning, that, so construed, it was insufficient for the purposes of good government and must prove a failure, he designedly gave it construction, in cases where he deemed that course necessary to the public interest, in opposition to what he knew to have been the intentions of the Convention. The objection that this was setting at naught the declared will of the people had but little weight with him.

He believed that a majority of the Convention would have been content to incorporate the powers he now claimed in the Const.i.tution if they had not been deterred by the fear that it would not be ratified, and for the opinion of a majority of the people he made proverbial his want of respect. He held them incapable of judging in such questions. He was as anxious as any man to promote their happiness and welfare, but he thought it a political necessity that this could only be done in despite of themselves; no man could possibly be less p.r.o.ne than he was to the employment of sinister means in private life, and yet he held them excusable in dealing with the people; he thought nothing effectual and salutary could be done with them without appeals to their special interests, without exciting their pa.s.sions and turning them to the side of the Government. This was the vicious feature of his political creed, and proofs of its existence could be multiplied almost without end; but, as the subject will unavoidably and often present itself, I will content myself here with an extract from a letter written by him to his friend Morris, after the great public transactions in which he had been engaged were princ.i.p.ally ended. The last letter to Morris, from which I have quoted, spoke of the past; this looks to the future, and shows the lengths to which he was yet, as he had always been, willing to go. The letter is dated April 6, 1802, in which, after complimenting Morris upon his efforts "in resisting the follies of an infatuated administration,"

he thus points his friend to the work before them:--

"But, my dear sir, we must not content ourselves with a temporary effort to oppose the approach of evil. We must derive instruction from the experience before us, and learning to form a just estimate of things to which we have been attached, there must be a systematic and persevering endeavor to establish the fortune of a great empire on foundations much firmer than have yet been devised. What will signify a vibration of power if it cannot be used with confidence or energy, and must be again quickly restored to hands which will prostrate much faster than we shall be able to rear under so frail a system? Nothing will be done until the structure of our national edifice shall be such as naturally to control eccentric pa.s.sions and views, and to keep in check demagogues and knaves in the disguise of patriots."[20]

[20] Hamilton"s _Works_, Vol. VI. p. 536.

This speaks for itself, and certainly nothing could be more superfluous than an attempt to elucidate its import and extent. It deserves to be remembered that this was in the thirteenth year of the Const.i.tution, now described as a "frail system," and which, in a previous letter to Morris, was called a "frail and worthless fabric." Hamilton enforced his construction, but upon that point we will say no more until we arrive at a period when it was exposed to a scrutiny by which it was forever exploded. Looking to the construction of the Const.i.tution which I have described for his authority to adopt the measures he deemed necessary to establish his policy, he advanced in his work with his accustomed industry and perseverance. The outlines of that policy were substantially portrayed in his speeches in the Federal Convention, in his letter to General Washington from New York during the session of that body, and in a paper written by him after its adjournment, and now published by his son,--all of which have already been referred to. It was founded on a conviction, doubtless sincere and at all events not liable to change, that great danger to the federal system was to be apprehended from the hostility of the State governments, and on a consequent desire to reduce their power and importance; on an immovable distrust of the capacities and dispositions of the ma.s.ses; and on an unshaken belief that the success of the new government could only be secured by a.s.similating its action to that of the English system as nearly as that could be done without too gross, and therefore dangerous, violation of the well understood and most cherished sentiments of the people.

The power wielded by the English ministry, in Parliament and in the country, springs from influences derived from various sources, mainly from the funding system, from the Bank of England, from connection with the East India Company, and from ability to confer government favors on individuals and cla.s.ses in the shape of offices and dignities in church and state, of t.i.tles, pensions, bounties, franchises, and other special privileges of great value. Its power in these respects is derived from the crown in virtue of its prerogatives, aided by acts of Parliament where these are required by the Const.i.tution.

The measures which Hamilton deemed indispensable to the success of the new government, in addition to those authorized by the Const.i.tution, consisted of

_First._ A funding system upon the English plan, with authority to a.s.sume the separate debts of the States;

_Second._ A national bank; and,

_Third._ An unrestricted exercise by Congress of the power to raise money, and the employment of the national revenue in patronizing individual, cla.s.s, and corporate interests, according to the plan described in his report, nominally on manufactures, but embracing an infinite variety of other concerns.

The funding system, as presented to Congress by him, as well as the bank were not only on the English plan, but as far as that could consistently be effected were copies of the originals, and substantially the same reasons for their establishment here were a.s.signed in his report as had been given for their first creation in England. The third measure, or rather the third in his system of measures, as set forth in the Secretary"s report, partook largely of the general character of some of those alluded to above as sources of ministerial power in England, and, in connection with the means of securing legitimate influence allowed by our Const.i.tution, would have clothed the administration here with equal power, even without authority to grant t.i.tles of n.o.bility, ecclesiastical preferments and dignities, and other like privileges.

The advantages Hamilton antic.i.p.ated from these measures consisted of the effect which the fact of their establishment would have upon every question of const.i.tutional power, the popularity and political influence which the administration would acquire in and through their organization, and greater than all, of their inevitable influence upon the future character of the inst.i.tutions of the country. He might well think that he would not thereafter have any serious difficulty in regard to const.i.tutional power to do what he desired, if he could obtain the pa.s.sage of acts, according to the forms of the Const.i.tution, authorizing Congress to _lend_ money to the States under a provision in that instrument giving it power to _borrow_ money; to establish a national bank, when a possible ground for pretense to such a power had been expressly excluded from the Const.i.tution, and when every body knew that both the Convention that made it and a vast majority of the States and people by whom it was adopted were at the time opposed to such an inst.i.tution; and not only to raise money upon the principle of an unlimited power to do so, but also to expend it according to the pleasure of the Government, subject to no other limitation than that it should regard the purpose as conducive to the common defense and general welfare,--a principle he distinctly avowed in his report on manufactures. If he had succeeded in these points and secured his advances, he would have been fully warranted in regarding the enumeration of the powers of Congress contained in the Const.i.tution as a sham, and the brief clause he proposed to the Convention, giving to the national legislature power to pa.s.s all laws which it should judge necessary to the common defense and general welfare of the Union, as inserted in its place. The increased power and influence derived by the administration in the course of the organization of some of these measures will be seen as we proceed, and my own views in respect to their combined effects upon our inst.i.tutions and upon the character of the government, will be given hereafter.

In England the bank was first established, but Hamilton gave precedence here to the funding system and made it the first great measure of his administration of the Treasury Department, contenting himself in the first instance with a declaration, in his report in favor of the funding system, of his intention to connect a bank with it. The Secretary"s annunciation of the principles upon which he proposed to found that system, and their resemblance to those by which the English system was regulated, were received with unmistakable signs of dissatisfaction by large portions of the people in all parts of the country. The Legislature of Virginia pa.s.sed by decided majorities resolutions denouncing the Secretary"s plan with great severity. These, with similar demonstrations in other States, show the depth of the excitement of the public mind upon the subject.

The public debt of England had its origin in an early practice of her government to antic.i.p.ate her resources through loans effected upon pledges of portions of her revenues, to be re-imbursed, princ.i.p.al and interest, at specific periods. These were made to correspond with the time of the probable collection of the taxes out of which the loans were to be paid; and such, it may safely be a.s.sumed, was also the origin of public debt in all countries. For a time these antic.i.p.ations were limited in their amounts to the actual value of the fund upon the credit of which they were obtained, the loans were discharged according to their terms, and the operation proved to be a great convenience to the government without prejudice to any interest. It was not long, however, before a practice, originally no other than a fair business transaction, was perverted to screen men in power from the odium of enforcing taxation to repay the princ.i.p.al sum borrowed. The disproportion between the revenues to be received and the antic.i.p.ations successively charged upon them soon became too great to leave the government able to pay both princ.i.p.al and interest on the loans which its necessities required. Some device was therefore desirable by which it would be enabled to replenish the public coffers without a too great increase of taxation, which, for obvious reasons, is always the peculiar aversion of those intrusted with the management of public affairs. The plan adopted, in lieu of antic.i.p.ations of the revenue of the character I have described, was to make loans upon the credit of the nation, re-imbursable at the pleasure of the government, with special and adequate provisions for the payment of the interest only, or to borrow money upon perpetual annuity equivalent to the interest of the sum borrowed, government being at liberty to redeem such annuity at any time by paying back the princ.i.p.al sum, with authority also to borrow on annuities for terms of years and for lives. These became thenceforth leading features in the English funding system.

These facilities proved amply sufficient for every exigency. The public debt increased with unheard of rapidity under the influence and the expenses of the wars in which England was successively engaged. In 1706, when its foundation was laid, it amounted to but little more than five millions sterling, and in 1777 it had increased to one hundred and thirty-six millions sterling. Near the latter period the subjects of public debt, the principles of the English funding system, and their effects in all countries where they had been adopted, were brought to a searching scrutiny by Adam Smith in his "Wealth of Nations," who demonstrated from reason and experience that they had invariably enfeebled every nation which had embraced them. He insisted that there was scarcely an instance in which a public debt contracted and established upon those principles had been fully paid, and that the revenues of the countries subject to such inc.u.mbrances had been relieved from the destructive effects of an irredeemable public debt, if relieved at all, either by avowed bankruptcy or by pretended payments through such artifices as adulterations of the coin, or raising its denomination, or by reductions of the rate of interest.

In 1786, four years before the introduction of Hamilton"s funding system, the public debt of England had already increased to 276,000,000; and so rapid has been its subsequent growth that the strictures and predictions of Adam Smith are at this day receiving their confirmation in the existence of a national debt of more than 800,000,000. By no people were these facts and circ.u.mstances, so far as they had then transpired, better understood than by ours. They had watched the condition of England, in regard to her increasing debt, through the Revolutionary contest in the hope that she would be compelled by the very extent of her indebtedness to stay the hand she had uplifted to enslave them. It ought not therefore to have been a matter of surprise to Hamilton and his a.s.sociates, and cannot be to us viewing these matters retrospectively, that his recommendation of a funding system, upon the English plan, with a national bank as its adjunct, as the first great measures of the new government, were received by large portions, probably a majority, of the people, with so much dissatisfaction and distrust of the motives in which the recommendation had its origin--a distrust naturally produced by the precipitate resort to the system of a nation against which the hostile feelings of the war had not yet subsided, and which under that system, in the estimation of many sober minded and sagacious men, was rapidly sinking into the gulf of hopeless indebtedness.

No necessity can now be perceived for the adoption at that moment of a scheme of such magnitude as that which Hamilton proposed--one so well calculated to excite jealousy, and against which the warning voice of experience had become so audible. The existing debt, sacred as the price of liberty and ent.i.tled to all solicitude for its satisfactory discharge, was not, in view of the increased resources of the Government, either very large or, in any other event than a failure in the payment of interest, ineligibly situated, or in any great danger of soon becoming impracticable or oppressive. The foreign debt then stood at eleven millions, the princ.i.p.al payable by moderate instalments, the last of which, not due till 1808, was never, save a small portion of the French debt, actually funded, and was paid off during the administration of Mr. Madison. The domestic debt of the United States amounted to forty millions, which Secretary Hamilton thought might fairly be regarded as payable at the pleasure of the Government. The interest and instalments as they fell due were therefore the princ.i.p.al subjects to be dealt with.

The change which had at last been effected in the Const.i.tution, securing to the Federal head full power to levy and collect all necessary revenue, and the prospects of an improving trade and increasing prosperity in every branch of business gave of themselves to the Government a good right to antic.i.p.ate an improvement in the public credit sufficient to enable it to make direct loans abroad upon fair terms, payable at specific and reasonable periods, as had been before done without these advantages. On the avails of these, with the surplus of an increasing revenue over and above the six hundred thousand dollars, which was all that was asked for the support of Government in other respects than the payment of debts, the Secretary might, it would seem, have safely relied to meet accruing demands on account of the public debt. It is well known that such favorable effects resulted from the change which had taken place in the Government and our credit abroad was so greatly improved that loans which had before been obtained with difficulty and in a considerable degree through favor, and in part by means of specific guaranties, were now sought after and taken with avidity in Amsterdam and Antwerp. The friends of the Secretary, and those who favored his policy, naturally claimed that this favorable change was due to his report, and to the acts that were pa.s.sed in pursuance of his recommendation. A portion of the effects produced may have been attributable to this cause, but it was rendered quite clear that the improvement could not be thus explained as to Holland, where a large part of our foreign debt was held and to which country the whole was soon transferred, by the facts that her bankers not only continued to lend freely to our Government in the old way, upon direct loans, payable at specific periods,--princ.i.p.al and interest,--but expressly declined, as did also our creditors in Antwerp, to accept our proposal for converting the debts due upon loans of that character into a funded domestic stock.

The whole of our foreign debt in Holland, that which was due at the time of the pa.s.sage of the act establishing the funding system as well as that which was subsequently contracted there and at Antwerp, and the princ.i.p.al part of that held elsewhere, was paid to the entire satisfaction of the creditors by the means I have described, and without being funded. The domestic debt, the least difficult or delicate to deal with, would doubtless have been seasonably and satisfactorily discharged in the same way, if General Hamilton had not, at an early age, imbibed an opinion, which he never changed, that a permanent national debt was an advantage to any country, and likely to be particularly useful in a confederacy like ours. That such was his sincere opinion there cannot be the slightest doubt, and that he contemplated a public debt here of a character as permanent as that was likely to be which then existed in England is fairly to be inferred from his acts.

Hamilton"s mind was from a very early period turned to politics, and of political subjects that of finance was from the beginning the favorite theme of his meditations, among the most prominent results of which was a conviction that of the agencies necessary to good government, whatever might be its form, there were none more useful than a well funded public debt and a judiciously constructed national bank. At the early age of twenty-three, whilst filling a post of subordinate rank in the army, he addressed an anonymous communication (as I have before mentioned) to Robert Morris, whose mind was inclined in the same direction, and who was extensively employed in the management of fiscal affairs, enforcing with much ability his favorite ideas. Some of the contents of this communication are given in the "Life of Hamilton" by his son. In a subsequent letter to the same gentleman, he argues in support of kindred positions. In his report upon public credit he advances the same favorable opinion, and in substantially the same language, of the effects of the particular debt he proposed to fund upon terms which promised perpetuity. He did, it is true, accompany the latter declaration with a protest against the lat.i.tude, inviting to prodigality, which was sometimes given to the idea of the utility of a public debt, and with a recommendation in favor of the establishment of a sinking fund, and other reservations and qualifications, couched in the guarded terms usually employed by able men in state papers upon controverted public questions. But the report contained nothing inconsistent with the idea of keeping on foot a national debt as long as it did not become "too large,"--a condition that could scarcely fail to give way to the supposed exigencies of the moment,--and the farther condition of an indispensable necessity for its continuance never found a place in his reports or weight in his opinions. On the contrary, the advantages of a national debt in preparing the people for those periods of oppressive a.s.sessment to which all nations are occasionally exposed, by constantly levying a reasonable tax to discharge interest, a princ.i.p.al reason in favor of a public debt a.s.signed in his letter to Morris; the utility and convenience of having always at hand a band whose special interest in the stability of the government would promptly rally them to its support,--an idea never long absent from Hamilton"s mind; the benefits which the agricultural, manufacturing, and commercial interests would derive from the funding of seventy millions of debt in the form and upon the principles he proposed, giving to it the capacity of being "subst.i.tuted for money" and increasing by that amount the floating capital, and to a great extent the circulating medium of the country; the beneficial influence of a funded debt in raising the value of land, in proof of which the experience of England is cited, besides supplying those important cla.s.ses with means to improve and enlarge their respective pursuits, and increasing those facilities by reducing the rate of interest, const.i.tuted the arguments and persuasions set forth in glowing and captivating terms in his reports, and though not necessarily confined to a _permanent_ national debt, indicate very clearly, to my mind at least, that it was such a debt that he had in view.

The uses to which the sinking fund had been applied in England and its inefficiency in the reduction of the national debt were well understood by the Secretary. The explanations of its greater efficacy here in after times will be given in another place. They had no connection with the views that were prevalent in the councils of the nation at the moment of which we are speaking. Every act of the Secretary was in keeping with the inference I have stated. In addition to the principle he proposed as the basis of his system, which, if not perpetual funding in express terms, postponed redemption to so remote and indefinite a period as to render it next to certain that it would never occur, there were other circ.u.mstances scarcely less confirmatory of the a.s.sumption that such was his intention.

The stand taken by Hamilton in the provision he proposed and which was adopted for a portion of the domestic debt had a great influence in creating the impression that his funding system had other than fiscal objects in view. His opponents not thinking either that system or the bank necessary for the public service--an opinion vindicated and sustained by subsequent experience--readily attributed the strong desire manifested for their establishment to political designs on the part of their author. Jefferson denounced the financial scheme as a "puzzle to exclude popular understanding and inquiry, and a machine for the corruption of the Legislature." In aid of the latter charge, besides going at least some length to sustain the imputation of Hamilton"s desire for an unnecessary increase of the public debt, came these facts: A large proportion of the domestic debt consisted of certificates of indebtedness given by the United States to the soldiers who fought our battles, and to the farmers, manufacturers, and merchants who furnished supplies for their support. These had been given because the Government had no money, but under promises of speedy payment. The holders were frequently driven by their necessities, and by misrepresentations in respect to the chances of payment, to part with them for trifling amounts. Had the matter stopped there, however much regretted and condemned, it might not have attracted the notice which was taken of it.

But when Hamilton proposed to put the original holders and the fraudulent purchasers of these certificates upon the same footing, and when it became known to the members of Congress, which sat with closed doors, that the bill would pa.s.s in that shape, every part of the country was overrun by speculators, sped by horse and packet expresses, buying up large portions of the certificates still held by those to whom they were originally given at the rate of five shillings and, in some instances, of two shillings and sixpence in the pound. It was never doubted that members of Congress and their particular friends partic.i.p.ated in these speculations, and realized large sums by the certificates being funded at their nominal amounts. When the bill came up, several gentlemen, who afterwards became prominent members of the Republican party, earnestly supported a proposition to make a composition between the original holders and the a.s.signees of these papers, allowing to the latter the highest prices they had ever brought in the market, and settling with the former for the residue. Such an arrangement might have been effected without embarra.s.sment to the treasury by satisfactory grants of public lands, and the amount of debts might have been thus materially reduced. Mr. Madison in a sensible speech supported the justice of some such composition; but the friends of the Secretary in Congress, some of them interested in the result, carried the measure which had been elaborately argued in advance by Hamilton, in his report, and by which the whole was awarded to the speculators. The entire transaction caused deep disgust in the minds of many who felt solicitous for the purity of the Government, and not a few believed that the scramble which ensued was foreseen and counted upon as a source of influence to enlist Congress on the side of the administration. Their hostility to a system susceptible, as they thought, of such practices, was of course greatly inflamed.

The construction thus placed upon the Secretary"s course received its strongest confirmation from his proposal and untiring efforts for the a.s.sumption of the State debts. The first object of a prudent financier would seem to be to keep the debt he has to deal with at the lowest practicable point. Hamilton, on the contrary, whilst struggling with embarra.s.sments in respect to the debts for which the United States were legally bound, upon the largest portion of which many years of interest had been suffered to acc.u.mulate, proposed to increase the liability twenty-five millions by the voluntary a.s.sumption of debts which the Federal Government was under no obligations to pay; an a.s.sumption not only unsolicited on the part of the indebted States, but to which there was the best reason for believing that several among them would be opposed. The special representatives of the latter in the Senate, where the proposition originated, so earnestly contested it that the clause of the bill to carry it into effect could only be pa.s.sed by a majority of two, was in the first instance rejected in the House of Representatives against the united influences of the administration, and could only be reconsidered and barely carried by means of a discreditable intrigue to which the Secretary and Mr. Jefferson, as the latter has acknowledged with shame and contrition, were parties.

The reasons a.s.signed by Hamilton for this forced a.s.sumption of a debt which had never been audited, and the amount of which they were obliged to guess at, though framed with his usual ability, cannot, I should think, he now regarded as sufficient to justify the step. The weight which they might by any be supposed to possess was overbalanced by the obvious unconst.i.tutionality of the measure. It adopted as well the debts of the States which, upon the final settlement between them and the United States, were found in debt to the latter, as of those which proved to have balances in their favor, and was therefore a loan by the Federal Government to the former cla.s.s of States, made under the power in the Const.i.tution authorizing Congress to borrow money.

This measure, like that which preceded it, was well calculated to strengthen the suspicion with which the minds of his opponents became thoroughly imbued, that Hamilton in all his measures had in view the advancement of partisan objects, from its peculiar adaptation to the promotion of a leading point in his whole policy,--that of weakening State authority and strengthening that of the General Government at their expense. The distinctness and strength of expression with which this policy was avowed by him, in papers published by his son, have already been seen. Among the means suggested was the adoption of measures by which the attention of the people might be diverted from the State governments, upon which it was thought to be too intensely fixed, and turned towards the Federal head, and by which their pa.s.sions might be excited and turned in the same channel. What single measure could exert greater influence in giving effect to this policy or show more strikingly the hand of a master than that by which the intense and constant solicitude of the holders of twenty-five millions of debts, scattered, in comparatively small sums, through the different States, and embracing, it is fair to presume, the most active of their citizens, was turned from the local authorities to the Federal Government, first for the settlement of the amount, and next for the payment of their demands,--by which the States themselves became liable for the amounts so paid to a Government which, certainly in some of its departments, regarded them as rival not to say dangerous powers, and by which also the disreputable scramble for those debts, commenced in the case of the certificates of the United States, would be revived.

The conflicting views entertained upon these subjects by Hamilton and Jefferson soon a.s.sumed the form of a distinct and well defined issue between the friends and political followers of each,--the former composing the Federal party, and the latter const.i.tuting elements of which the Republican party, then in embryo, was formed. Hamilton"s doctrine, and for a season the avowed creed of his party, was that there were advantages in the existence of a national debt which more than counter-balanced any evils that might arise from its unnecessary continuance, and this faith shaped the whole course of their action upon the subject. Its subjection to the operations of a sinking fund, and the qualification that the amount of the debt should be kept within proper limits, were of course features in their platform. Estimating the results of the former here by its efficiency in England, and instructed by the experience of all nations that restraints upon the acc.u.mulation of debt, however solemnly imposed, are of no account with applicants for grants from the public treasury, and unhappily little more respected by men in power when the importunities of friends and supporters are brought in compet.i.tion with the interests of posterity, it was not difficult to foresee the futility of these conditions. Mr. Jefferson, on the contrary, from the beginning regarded a public debt as a "mortal canker" from which it was the duty of the Government to relieve the country at the earliest practicable moment, and in this spirit he and his friends acted throughout.

The subject of Finance had not at that early period been made as familiar to the American mind as it has since become, and the genius of Hamilton and the sanction of Washington, which his plans were supposed to receive, were well calculated to discourage opposition to them. But many of those who disapproved of his course were not to be moved from what they regarded as the line of duty by any considerations personal to themselves. They resisted Hamilton"s financial schemes from the start, and it was in the discussions upon this issue that some, who subsequently became famous leaders in the old Republican party, fleshed their maiden swords. No two measures ever attracted a larger share of the attention of the American people, excited more deeply their feelings and their apprehensions, or exerted a greater influence upon the politics of this country than did the funding system and the first Bank of the United States. The peculiar results of the contest that was waged in respect to them will be noticed hereafter.

Hamilton had done much by their establishment and organization to strengthen the Federal arm, and proportionately to weaken the State governments, but the influence he derived from these measures was not sufficiently operative upon several cla.s.ses whom he desired to conciliate. The wished for impression had been made upon the commercial cla.s.s,--at all times a powerful body and by the nature of their pursuits inclined to favor strong governments, banks, and funding systems,--upon the domestic creditors of the General Government, upon the creditors of the several State governments, upon all who had a pa.s.sion for gambling in stocks, to whose appet.i.tes he furnished so much aliment,--a numerous, crafty, and influential portion of almost every community,--and upon all who wanted to borrow or had money to lend, a cla.s.s still more numerous.

Besides these, whom Mr. Canning called the "train-bands of commerce," in general the most dangerous to encounter and the most efficient when at his service, there were still larger interests, and in the aggregate more powerful, upon whom the Secretary desired to make similar impressions and to secure their attachment to his system.

In August, 1791, whilst concocting the measures by which he hoped to secure the support of these, and flushed by the success which had hitherto crowned his efforts, he thus (as I have already quoted) addressed his great rival, Mr. Jefferson:--

"I own," said he, "it is my opinion, though I do not publish it in Dan or Beersheba, that the present Government is not that which will answer the ends of society, by giving stability and protection to its rights, and that it will probably be found expedient to go into the British form; however, since we have undertaken the experiment, I am for giving it a fair course, whatever my expectations may be. The success, indeed, so far, is greater than I had expected, and therefore at present success seems more possible than it had done heretofore, and there are still other and other stages of improvement, which, if the present does not succeed, may be tried and ought to be tried before we give up the republican form altogether."

First in the order of time among "the other and other stages of improvement" with which the prolific mind of the Secretary was busied, were doubtless those embraced in his "Report on Manufactures" which made its appearance four months afterwards, and was probably then in course of preparation. It contains more than a hundred folio pages, in print, and is perhaps the most thoroughly elaborated and artfully devised state paper to be found in the archives of any country. Manufactures were alone spoken of in the t.i.tle, but it embraced every species of industry that offered the slightest chance of being successfully prosecuted in the United States, and contained a very full and carefully considered exposition of their respective conditions, and of the facilities by which their success might be increased, to extend which to those diversified interests it undertook to show was within the power and the duty of the Government. This report, on account of the striking ill.u.s.tration it affords of the progress of parties, and the powerful influence it exerted upon their fate, is well ent.i.tled to the fullest notice. But it is not possible within the limits I have prescribed to myself to go as fully into the review of such a paper as justice to the subject would require. I must therefore content myself with an abridged account of the various branches of industry the advancement of which was the design of its author, and of the manner in which he proposed to accomplish his object.

The manufactured articles which he specified as fit subjects for governmental aid were those made of skins, of iron, of wood, of flax and hemp, bricks, coa.r.s.e tiles, and potters" wares, ardent spirits and malt liquors, writing and printing paper, hats, refined sugars, oils of animals and seeds, soap and candles, copper and bra.s.s wares, tin wares, carriages of all kinds, snuff, chewing and smoking tobacco, starch, lampblack and other painters" colors, and gunpowder. This enumeration was followed by a detailed statement of the great variety of articles embraced in the general denominations. Besides these, which he said had attained a considerable degree of maturity, there was a vast sum of household manufacturing which was made not only sufficient for the use of the families that made them but for sale also, and in some instances for exportation, and consisted of great quant.i.ties of coa.r.s.e cloths, coatings, serges, and flannels, linsey-woolseys, hosiery of wool, cotton and thread, coa.r.s.e fustians, jeans and muslins, checked and striped cotton and linen goods, bedticks, coverlets and counterpanes, tow linens, coa.r.s.e shirtings, sheetings, toweling, and table linen, and various mixtures of wool and cotton, and of cotton and flax.