Concerning which some farther arrangement is necessary.

The greatest part of the registered debt, hitherto unsubscribed, is owned by the citizens of foreign countries, most, if not all of whom appear now disposed to embrace the terms held out by the act above mentioned; extensive orders having been received from those creditors, to subscribe to the loan, after the time for receiving subscriptions had elapsed.

[Page 6] A considerable part of the outstanding or floating debt, consists of loan-office certificates issued between the first of September, 1777, and the first of March, 1778, bearing interest on the nominal sum. Many of the holders of this species of debt have come in upon the terms of the act, but others have hitherto declined it; alledging, that the special nature of their contract gives a peculiarity to their case, and renders the commutation proposed not so fair an equivalent to them, as in other instances. They also complain, that the act has had, towards them, a compulsory aspect, by refusing the temporary payment of interest, unless they should exchange their old for new certificates, essentially varying the nature of their contract.

A resolution of Congress of the tenth of September, 1777, stipulates in fa­vour of this class of creditors, interest upon the nominal, instead of the real principal of their debt, until that principal be discharged. This certainly renders their contract of a nature more beneficial than that of other creditors; but they are at the same time liable to be divested of the extra-benefit it gives them, by a payment of their specie-dues; and it may be observed, that they have actu­ally enjoyed, and by accepting the terms offered to them, were enabled to realise, advantages superior to other creditors. They have been paid interest by bills on France from the tenth of September, 1777, to the first of March, 1782, while other creditors received their interest in depreciated bills of the old emissions; and the terms of the loan proposed put it in their power to realise the benefit of interest on the nominal amount of their respective debts, at rates from 6 10/100, nearly to 10 47/100 per cent. on their real or specie capital down to the last of December, 1790.

It does not therefore appear to have been an unreasonable expectation, that they, as readily as any other description of public creditors, would have ac­quiesced in a measure, calculated for the accommodation of the government, under circumstances, in respect to which, it has been demonstrated by subsequent events that the accommodation desired was consistent with the best interest of the public creditors. A large proportion of the parties interested have indeed view­ed the matter in this light, and have embraced the proposition. It is probable, that the progress of things will satisfy the remainder, that it is equally their in­terest to concur; if a farther opportunity be afforded. But it is, nevertheless, for themselves only to judge, how far the equivalent proposed is, in their case, a reasonable and fair one; how far any circumstances in their claim may sug­gest reasons for moderation on their part; or how far any other motives, pub­lic or private, ought to induce an acceptance. And the principles of good faith require, that their election should be free.

On this ground, the complaint which regards the withholding of a tempo­rary payment of interest, except on the condition of a surrender of the old cer­tificates for new ones importing a contract substantially different, appears to the Secretary not destitute of foundation. He presumes, that the operation of that provision, in the particular case was not adverted to; or, that an ex­ception would have been introduced as most consonant with the general spirit and design of the act. Accordingly the farther measures which will be submit­ted, will contemplate a method of obviating the objection in question.

From the consideration, that an extension of the time for receiving subscrip­tions, upon the terms of the act making provision for the debt of the United States, is desired by a large proportion of the non-subscribing creditors; and from the farther consideration, that sufficient experience has not yet been had of the productiveness of a considerable branch of the revenues which have been established, to afford the light necessary to a final arrangement—it is, in the judgment of the Secretary, adviseable, to renew the proposition for a loan in the domestic debt, on the same terms with the one which has been closed, and [Page 7] to allow time for receiving subscriptions to it until the last day of September next, inclusively; making provision for the temporary payment of interest to such who may not think fit to subscribe, for the year 1792, of the like nature with that which was made in the same case for the year 1791—except as to the holders of loan-office certificates, issued between the first of September, 1777, and the first of March, 1778; in respect to whom it is submitted as pro­per to dispense with the obligation of exchanging their old certificates for new, as the condition of their receiving interest in capacity of non-subscribers; and to allow them, without such exchange, to receive the same interest, both for the years 1791 and 1792, as if they had subscribed to the first loan. It will not be materially difficult, so to regulate the operation at the treasury as to avoid in the particular case, that danger of imposition by counterfeits, which was the motive to the general provision for an exchange of certificates.

II. The amount of the subscriptions in the debts of the respective states, within the limits of the sum assumed in each, appears by the statement marked D. to be dollars 17,072,334 39/100 subject to the observations accompanying that statement. Consequently the difference between the aggregate of the sums subscribed, and the aggregate of the sums assumed, is dols. 4,427,665 61/100

This difference is to be attributed to several causes, the principal of which are the following. First, That the sums assumed in respect to certain states exceeded the actual amount of their existing debts. Second, That in various instances, a part of the existing debt was in a form which excluded it from be­ing received, without contravening particular provisions of the law; as in the case of certificates issued after the first day of January, 1790, in lieu of certifi­cates which had been issued prior to that period, which was reported upon by the Secretary on the twenty-fifth day of February last. Third, Ignorance of, or inattention to the limitation of time for receiving subscriptions. It appears, that a number of persons lost the opportunity of subscribing from the one or the other of these causes.

A strong desire that a farther opportunity may be afforded for subscriptions in the debts of the states, has been manifested by the individuals interested. And the states of Rhode-Island and New-Hampshire, have, by the public acts referred to the Secretary, indicated a similar desire. The affording of such farther opportunity, may either be restricted within the limit, as to amount, which is contemplated by the act itself, or may receive an extension which will embrace the residuary debts of the states.

The first may be considered as nothing more than giving full effect to a mea­sure already adopted.

The last appears to have in its favour all the leading inducements to what has been already done. The embarrassments which might arise from conflict­ing systems of finance are not entirely obviated. The efficacious command of the national resources for national exigencies, is not unequivocally secured. The equalizing of the condition of the citizens of every state, and exonerating those of the states most indebted, from partial burthens which would press up­on them in consequence of exertions in a common cause, is not completely ful­filled, until the entire debt of every stae, contracted in relation to the war, is embraced in one general and comprehensive plan. The inconvenience to the United States of disburthening the states, which are still encumbered with considerable debts, would bear no proportion to the inconvenience which they would feel, if left to struggle with those debts, unaided.

More general contentment, therefore, in the public mind, may be expected to attend such an exonoration, than the reverse; in proportion as the expe­rience of actual inconvenience would be greater, though only applicable to parts, in the one than in the other case.

[Page 8] With regard to states, parts only of the debts of which have been assumed, and in proportions short of those, which have prevailed, in favour of other states, and short also of what would have resulted from a due apportionment of the entire sum assumed; the claim to a further assumption is founded on considerations of equal justice, as relative to the measure itself, considered in a separate and independent light.

But there is a further reason of material weight for an immediate general assumption. Monied men, as well foreigners as citizens, through the expecta­tion of an eventual assumption, or that in some shape or other a substantial pro­vision will be made for the unassumed residue of the state debts, will be induc­ed to speculate in the purchase of them. In proportion as the event is unset­tled, or uncertain, the price of the article will be low, and the present propri­etors will be under disadvantage in the sale. The loss to them in favour of the purchasers is to be regarded as an evil; and as far as it is connected with a transfer to foreigners, at an undervalue, it will be a national evil. By what­soever authority an ultimate provision may be made, there will be an absolute loss to the community equal to the total amount of such undervalue.

It may appear an objection to the measure, that it will require an establish­ment of additional funds by the government of the United States. But this does not seem to be a necessary consequence. The probability is, that without a supplementary assumption, an equal, or very nearly equal augmentation of funds will be requisite to provide for greater balances in favour of certain states, which would be proportionably diminished by such assumption. The destina­tion, not the quantum of the fund, will therefore be the chief distinction between the two cases.

It may also appear an objection to a total assumption, that the magnitude of the object is not ascertained with precision. It is not certainly known, what sum is due in each state; nor has it been possible to acquire the information, owing to different causes. But though precise data are deficient, there are materials which will serve as guides. From the returns received at the trea­sury, assisted by information in other ways, it may be stated without danger of material error—That the remaining debts of the states over and above the sums already subscribed will not exceed the amounts specified in the statement D. ac­companying this report—And that, including the sums already subscribed, the total amount to be ultimately provided for, in the event of a general assumption, will not exceed 25,403,362 1 [...]/100 dollars, which would constitute an addition of 3,903,362, [...]1/100 dollars, to the sum of 21,500,000 dollars already assumed.

Should a total assumption be deemed eligible, it may still be adviseable to assign a determinate sum for each state, that the utmost limit of the operation may be pre-established; and it is necessary in order to the certainty of a due provision in proper time, that interest should not begin to be payable, on the additional sums assumed, till after the year 1792.

It will occur, that provision has been made, for paying to each state, in trust for its non-subscribing creditors, an interest upon the difference between the sum assumed for such state, and that actually subscribed, equal to what would have been payable, if it had been subscribed.

In the event of a farther assumption, either within the limits already esta­blished, or commensurate with the remaining debts of the states; it is con­ceived, that it will not be incompatible with the provision just mentioned, to retain, at the end of each quarter, during the progress of the farther subscrip­tion, out of the money directed to be paid to each state, a sum corresponding with the interest upon so much of its debts as shall have been subscribed to that period, paying the overplus, if any, to the state. An absolute suspension of that payment does not appear consistent with the nature of the stipulation, in­cluded [Page 9] in that provision; for though the money to be paid to a state be ex­pressly a trust for the non-subscribing creditors; yet as it cannot be certain beforehand, that they will elect to change their condition, the possibility of it will not justify a suspension of payment to the state, which might operate as a suspension of payment to the creditors themselves.

A farther objection to such a suspension results from the idea, that the pro­vision in question appears to have a secondary object; namely, as a pledge for securing a provision for whatever balance may be found due to a state on the general settlement of accounts. The payment directed to be made to a state, is "to continue until there shall be a settlement of accounts between the Uni­ted States and the individual states; and incase a balance should then appear in favour of a state, until provision shall be made for the said balance."

This secondary operation as a pledge or security (consistently with the intent of the funding act) can only be superseded in favour of the primary object, a provision for the creditors; and as far as may be necessary to admit them to an effectual participation of it. But as whatever money may be paid to a state, is to be paid over to its creditors, proportional deductions may, with propriety, be made from the debts of those creditors who may hereafter subscribe; so as that the United States may not have to pay twice for the same purpose.

If it shall be judged expedient, either to open again, or extend the assump­tion, it will be necessary to vary the description of the debts, which may be subscribed, so as to comprehend all those, which have relation to services or supplies during the war, under such restrictions as are requisite to guard against abuse.

In the original proposition for an assumption of the state debts, and in the suggestions now made on the same subject, the Secretary has contemplated, and still contemplates, as a material part of the plan, an effectual provision, for the sale of the vacant lands of the United States. He has considered this re­source, as an important mean of sinking a part of the debt, and facilitating ulti­mate arrangements concerning the residue. If supplementary funds shall be rendered necessary, by an additional assumption, the provision will most conve­niently be made, at the next session of Congress, when the productiveness of the existing revenues, and the extent of the sum to be provided for, will be better ascertained.

There is a part of the public debt of the United States, which is a cause of some perplexity to the treasury. It is not comprehended within the exist­ing provision for the foreign debt which is confined to loans made abroad; and it is questionable, whether it is to be regarded as a portion of the domestic debt. It is not only due to foreigners, but the interest upon it is payable, by express stipulation, in a foreign country, whence it becomes a matter of doubt, whether it be at all contemplated by the act making provision for the debt of the United States. The part alluded to is that, which is due to certain foreign officers, who served the United States during the late war. In consequence of a resolution of Congress, directing their interest to be paid to them in France, the certificates which were issued to them specify, that "in pursuance of and compliance with a certain resolution of Congress of the third day of February 1784, the said interest is to be paid, annually, at the house of Mons. le Grand, banker in Paris." Interest has accordingly been paid to them at Paris, down to the 31st of December 1788, by virtue of a special resolution of Congress of the 20th of August in that year; since which period, no payment has been made.

It has been heretofore suggested as the opinion of the Secretary, that it would be expedient to cause the whole of this description of debt to be paid off; among other reasons, because it bears an interest at six per centum per annum, [Page 10] payable abroad, and can be discharged with a saving. The other reasons al­luded to are of a nature both weighty and delicate, and too obvious, it is pre­sumed, to need a specification. Some recent circumstances have served to strengthen the inducements to the measure. But if it should, finally, be deemed unadviseable, it is necessary at least, that provision should be made for the inte­rest, which is now suspended, under the doubt that has been stated, and from the want of authority to remit it pursuant to the contract.

The amount of this debt, with the arrears of interest to the end of the year 1791, is Dollars 220,646. 81

IV. The act making provision for the debt of the United States has ap­propriated the proceeds of the western lands as a fund for the discharge of the public debt. And the act making provision for the reduction of the public debt, has appropriated all the surplus of the duties on imports and tonnage, to the end of the year 1790, to the purpose of purchasing the debt at the market price, and has authorised the President to borrow the further sum of two mil­lions of dollars for the same object.

These measures serve to indicate the intention of the legislature, as early and as fast as possible, to provide for the extinguishment of the existing debt.

In pursuance of that intention, it appears adviseable, that a systematic plan should be begun for the creation and establishment of a sinking fund.

An obvious basis of this establishment, which may be immediately contem­plated, is the amount of the interest on so much of the debt as has been or shall be, from time to time, purchased, or paid off, or received in discharge of any debt or demand of the United States, made payable in public securities—over and above the interest of any new debt, which may be created, in order to such purchase or payment.

The purchases of the debt already made have left a sum of interest in the Treasury, which will be encreased by future purchases—certain sums payable to the United States in their own securities, will, when received, have a similar effect. And there is ground to calculate on a saving upon the operations, which are in execution with regard to the foreign debt. The sale of the Western Lands, when provision shall be made for it, may be expected to pro­duce a material addition to such a fund.

It is therefore submitted, that it be adopted as a principle, that all interest which shall have ceased to be payable, by any of the means above specified, shall be set apart and appropriated in the most firm and inviolable manner, as a fund for sinking the public debt, by purchase or payment; and that the said fund be placed under the direction of the officers named in the second section of the act making provision for the reduction of the public debt, to be by them applied towards the purchase of the said debt, until the annual produce of the said fund shall amount to two per cent. of the entire portion of the debt which bears a present interest of six per centum, and thenceforth to be applied, towards the redemption of that portion of the debt, according to the right which has been reserved to the government.

It will deserve the consideration of the Legislature, whether this fund ought not to be so vested, as to acquire the nature and quality of a proprietary trust, incapable of being diverted, without a violation of the principles and sanctions of property.

A rapid accumulation of this fund would arise from its own operation; but it is not doubted, that the progressive developement of the resources of the country, and a reduction of the rate of interest, by the progress of public credit, already exemplified in a considerable degree, will speedily enable the government to make important additions to it, in various ways. With due [Page 11] attention to preserve order and cultivate peace, a strong expectation may be indulged, that a reduction of the debt of the country will keep pace with the reasonable hopes of its citizens.