March last, together with the accounts accompanying the latter. I am
sorry to find the funds we have in Europe are so deeply anticipated.
This circumstance introduces a degree of hesitancy and doubtfulness
into my measures, which is alike disagreeable and pernicious. I hope,
therefore, that all the old accounts will soon be wound up and finally
closed; and then in future I shall possess a full view of what is in
my power. With respect to any arrangements with the Court of Spain, I
incline to think that they will be necessary, for I persuade myself
that money negotiations through Havana might be performed to equal, if
not greater advantage, by private channels.
I am, Sir, with respect and esteem, &c.
ROBERT MORRIS.
* * * * *
TO THE GOVERNOR OF MARYLAND.
Office of Finance, July 9th, 1782.
Sir,
I have not been until this moment favored with your letter in Council
of the 5th. I pray that you will accept and present to the Council my
sincere thanks for your attention to the public service. Your offer to
pay for the transportation of clothing to the southern army, gives me
an additional reason to believe that a sense of the public distresses
will always operate a desire to relieve them. To go into detail of
those distresses, is at all times dangerous, and indeed it would be
impracticable, for they are so numerous that all my time would be
insufficient for the purpose. The publications made by the receivers
in the several States, will however carry a conviction of them, to
every man of sense end reflection.
It is my constant endeavor to administer the little aid which is
afforded to the best advantage; and I am in hourly apprehensions from
the dilatoriness which has been shown by almost all the States, in
granting the supplies required by Congress. No proposition can be
clearer than this, that the salvation of our country must depend upon
such grants; and it will be a matter of wonder for future generations,
how a people who once showed such enthusiastic ardor, should at the
moment when it is within their grasp, put everything to the hazard, by
omitting to make the little exertion that remains. Yet such is the
fact.
I shall rely on receiving considerable supplies of money from Maryland
in the course of the present month; and shall, in consequence, make
engagements for transporting the clothing and stores to the southern
army, and for other services equally pressing and essential. That you
will be obliged to sell the property of the State, at less than you
suppose it to be worth, I had long foreseen, and am thoroughly
convinced of. That is one among the very many objections against
raising specific taxes; but you may depend that the longer they are
kept on hand, the greater will be the loss. The people must be
undeceived, and the sales of such property will have a tendency to
produce that effect. They will at length, I hope, open their eyes, and
be convinced of a truth which all history and experience bear witness
to, namely, that the true art of governing is to simplify the
operations of government.
Permit me, Sir, before I close this letter, to press upon your
consideration the state of public affairs. Every operation is, at
present, supported by credit, and that credit has long hung but by a
thread. Unless the States give speedy and effectual aid, that thread
must break. It would long since have broken, and scenes of military
pillage, waste, murmuring, extravagance and confusion would again have
been opened, if I had not for some time declined all expenditure,
except what was necessary merely to feed the army. If, under such
circumstances, the enemy has made offensive operations, you may easily
guess the consequences. Your State will, I hope, contribute amply to
provide against them. Should anything happen, the fault will not lie
at the door of Congress or of their servants.
With perfect esteem and respect, &c.
ROBERT MORRIS.
* * * * *
TO JAMES LOVELL OF MASSACHUSETTS.
Office of Finance, July 10th, 1782.
Sir,
I have received your favors of the 24th and 27th of June. The conduct
of the States is very alarming, and has given me much serious
apprehension. A want of knowledge or of zeal among those who compose
the several Legislatures, produces misfortunes which their
constituents must feel, although they do not themselves appear to be
aware of them. Had permanent funds been established on which to borrow
money, in all human probability our credit would have been such, as
that a considerable part of every year's expenditure might have been
obtained in that way. The advantages of such a measure are self
evident. If we suppose the states at war possessed of equal force and
resources, the one of them enjoying credit, which the other wants, the
efforts would be so unequal, that the nation in credit might compel
her antagonist to ask peace in a very short period.
In America we have disdained to profit by experience, and therefore
are reduced to the sad necessity of bearing the whole burden of the
war at the present moment, when least able to bear it. Still, however,
I had hoped, by making anticipations on the taxes, to lay a foundation
for more extensive credit; and at length to recover that useful
confidence, which has been too carelessly squandered away. But in
fixing the first stone of this useful edifice, I am disappointed by
finding that after taxes are laid, and in the moment when I expect to
feel the benefits, the collection is postponed unto a future day. I
shall not dwell longer on this disagreeable topic. I deeply feel and
sincerely lament the consequences, which you may rely on it are far
more pernicious even in the article of expense than any person is
aware of; besides other things which are of equal, and may perhaps, be
of greater importance.
I find by examining the sums I have drawn on you for, that you can
find no great difficulty in making the payments by sales of the bills.
I would advise you, immediately on the receipt of this, to employ a
good broker to sell all the bills you have, at a price to be fixed
between you, leaving it optional in the party, to pay either specie,
bank notes, or my notes, and give from a week to a fortnight credit to
good hands. The price will, I suppose, be high if sold in this
manner, and you will doubtless obtain a preference in the sales over
others. When you open this business it must be transacted speedily by
letting your broker make the sales, and take the promisory notes from
the parties. The effects of this plan will be as follows; people
knowing that the notes are at a discount, will readily, I suppose,
make purchases on such conditions; and if they do, you will thereby
raise them to par, and command a considerable sum in specie, for I
know there are very few now in your country, and therefore when they
come to be bought up and looked for, their value will rise; and I
presume that taxation will then come in to aid their farther
circulation.
I am, Sir, with great respect, &c.
ROBERT MORRIS.
* * * * *
TO THE GOVERNOR OF MARYLAND.
Office of Finance, July 29th, 1782.
Sir,
I have now before me your two favors of the 12th instant. You will
find my answers as well in a former letter, as in the enclosed
circular. For what remains I must only declare to you my regret at
finding your prospects so gloomy. The idea that taxes cannot be raised
because of the want of specie, is very general, indeed it is almost
universal, and yet nothing can be more ill-founded. If the people be
put in the necessity of procuring specie, they will procure it. They
can if they will. Tobacco may not sell at one moment, grain at
another, or cattle at a third; but there are some articles such as
horses, which will sell at all times. The mischief is, that when a
purchaser offers, the party not being under a necessity of selling,
insists on a higher price than the other can afford to give. Thus the
commerce is turned away to another quarter. Nothing but the necessity
of getting money will bring men in general to lower their prices. When
this is done purchasers will offer in abundance, and thus it will be
found, that the tax instead of lessening will increase the quantity of
specie. But so long as the want of it can be pleaded successfully
against taxes, so long that want will continue. And then all that
remains to consider is, whether the army can be maintained by such a
plea. The States, Sir, must give money, or the army must disband.
I have the honor to be, &c.
ROBERT MORRIS.
* * * * *
TO THE PRESIDENT OF CONGRESS.
Office of Finance, July 29th, 1782.
Sir,
The reference which Congress were pleased to make of a remonstrance
and petition from Blair Mc Clenaghan and others, has induced me to
pray their indulgence while I go somewhat at large into the subject of
that remonstrance.
The propriety and utility of public loans have been subjects of much
controversy. Those who find themselves saddled with the debts of a
preceding generation, naturally exclaim against loans; and it must be
confessed, that when such debts are accumulated by negligence, folly
or profusion, the complaint is well founded. But it would be equally
so against taxes, when wasted in the same way. The difference is, that
the weight of taxes being more sensible, the waste occasions greater
clamor, and is therefore more speedily remedied. But it will appear,
that the eventual evils, which posterity must sustain from heavy taxes
are greater than from loans. Hence may be deduced this conclusion,
that in governments liable to a vicious administration, it would be
better to raise the current expense by taxes; but where an honest and
wise appropriation of money prevails, it is highly advantageous to
take the benefit of loans. Taxation to a certain point, is not only
proper but useful, because by stimulating the industry of individuals,
it increases the wealth of the community. But when taxes go so far as
to entrench on the subsistence of the people, they have become
burdensome and oppressive. The expenditure of money ought in such case
to be, if possible, avoided; if unavoidable, it will be most wise to
have recourse to loans.
Loans may be of two kinds, either domestic or foreign. The relative
advantages and disadvantages of each, as well as those which are
common to both, will deserve attention. Reasonings of this kind, as
they depend on rules of arithmetic, are best understood by numerical
positions. For the purposes of elucidation, therefore, it may be
supposed that the annual tax of any particular husbandman were fifteen
pounds, so that (the whole being regularly consumed in payment of
taxes) he would be no richer at the end of the war, than he was at the
beginning. It is at the same time notorious, that the profits made by
husbandmen, on funds which they borrowed were very considerable. In
many instances their plantations, as well as the cattle and family
utensils, have been purchased on credit, and the bonds given for both
have shortly been paid by sales of produce. It is, therefore, no
exaggeration to state the profits at twelve per cent. The enormous
usury, which people in trade have been induced to pay, and which will
presently be noticed, demonstrates that the profits made by the other
professions, are equal to those of the husbandman.
The instance, therefore, taken from that which is the most numerous
class of citizens, will form no improper standard for the whole. Let
it then be farther supposed in the case already stated, that the party
should annually borrow the sum of ten pounds at six per cent, to pay
part of the tax of fifteen pounds. On this sum then he would make a
profit of twentyfour shillings, and have to pay an interest of twelve
shillings. The enclosed calculation will show, that in ten years he
would be indebted one hundred pounds, but his additional improvements
would be worth near one hundred and fifty, and his net revenue be
increased near twelve, after deducting the interest of his debt.
Whereas if he had not borrowed, his revenue, as has been already
observed, would have continued the same. This mode of reasoning might
be pursued farther, but what has been said is sufficient to show, that
he would have made a considerable advantage from the yearly loan. If
it be supposed, that every person in the community made such a loan, a
similar advantage would arise to the community. And lastly, if it be
supposed, that the government were to make a loan and ask so much less
in taxes, the same advantage would be derived. Hence, also, may be
deduced this position, that in a society where the average profits of
stock are double the interest at which money can be obtained, every
public loan for necessary expenditures, provides a fund in the
aggregate of national wealth equal to the discharge of its own
interest.
Were it possible that a society should exist, in which every member
would of his own accord industriously pursue the increase of national
property, without waste or extravagance, the public wealth would be
impaired by every species of taxation. But there never was, and unless
human nature should change, there never will be such a society. In any
given number of men, there always will be some who are idle, and some
who are extravagant. In every society also there must be some taxes,
because the necessity of supporting government and defending the State
always exists. To do these on the cheapest terms is wise, and when it
is considered how much men are disposed to indolence and profusion it
will appear, that even if those demands did not require the whole of
what could be raised, still it would be wise to carry taxation to a
certain amount, and expend what should remain after providing for the
support of government and the national defence, in works of public
utility, such as the opening of roads and navigation. For taxes
operate two ways towards the increase of national wealth. First, they
stimulate industry to provide the means of payment. Secondly, they
encourage economy, so far as to avoid the purchase of unnecessary
things, and keep money in readiness for the tax gatherers. Experience
shows, that those exertions of industry and economy grow by degrees
into habit. But in order that taxation may have these good effects,
the sum which every man is to pay and the period of payment, should be
certain and unavoidable.
This digression opens the way to a comparison between foreign and
domestic loans. If the loan be domestic, money must be diverted from
those channels in which it would otherwise have flowed; and,
therefore, either the public must give better terms than individuals,
or there must be money enough to supply the wants of both. In the
latter case, if the public did not borrow, the quantity of money would
exceed the demand, and the interest would be lowered; borrowing by the
public, therefore, would keep up the rate of interest; which brings
the latter case within the reason of the former. If the public out bid
individuals, those individuals are deprived of the means of extending
their industry; so that no case of a domestic loan can well be
supposed where some public loss will not arise to counterbalance the
public gain, except where the creditor spares from his consumption to
lend to the government, which operates a national economy. It is,
however, an advantage peculiar to domestic loans, that they give
stability to government, by combining together the interests of the
monied men for its support; and, consequently, in this country a
domestic debt would greatly contribute to that union, which seems not
to have been sufficiently attended to or provided for in forming the
national compact. Domestic loans are also useful, from the farther
consideration, that as taxes fall heavy on the lower orders of the
community, the relief obtained for them by such loans more than
counterbalances the loss sustained by those who would have borrowed
money to extend their commerce or tillage. Neither is it a refinement
to observe, that since a plenty of money and consequent ease of
obtaining it, induce men to engage in speculations, which are often
unprofitable, the check which these receive is not injurious, while
the relief obtained by the poor is highly beneficial.
By making foreign loans, the community, as such, receive the same
extensive benefits, which one individual does in borrowing of another.
This country was always in the practice of making such loans. The
merchants in Europe trusted those in America. The American merchants
trusted the country store-keepers, and they the people at large. This
advance of credit may be stated at not less than twenty millions of
dollars. And the want of that credit now is one principal reason of
those usurious contracts mentioned above. These have been checked by
the institution of the bank, but the funds of that corporation not
permitting those extensive advances, which the views of different
people require, the price given for particular accommodations of money
continues to be enormous; and that again shows, that to make domestic
loans would be difficult, if not impracticable. The merchants not
having now that extensive credit in Europe, which they formerly had,
the obtaining such credit by government becomes in some sort
necessary.
But there remains an objection with many against foreign loans, which
(though it arises from a superficial view of the subject) has no
little influence. This is, that the interest will form a balance of
trade against us, and drain the country of specie; which is only
saying in other words, that it would be more convenient to receive
money as a present, than as a loan; for the advantages derived by the
loan exist, notwithstanding the payment of interest. To show this more
clearly, a case may be stated, which in this city is very familiar.
An Island in the Delaware overflowed at high water has for a given
sum, suppose a thousand pounds, been banked in, drained, and made to
produce, by the hay sold from it at Philadelphia, a considerable sum
annually; for instance, two hundred pounds. If the owner of such an
Island had borrowed in Philadelphia the thousand pounds to improve it,
and given six per cent interest, he would have gained a net revenue of
one hundred and forty pounds. This certainly would not be a balance of
trade against his Island, nor the draining it of specie. He would gain
considerably, and the city of Philadelphia also would gain, by
bringing to market an increased quantity of a necessary article.
In like manner money lent by the city of Amsterdam to clear the
forests of America would be beneficial to both. Draining marshes and
bringing forests under culture, are beneficial to the whole human
race, but most to the proprietor. But at any rate, in a country and in
a situation like ours, to lighten the weight of present burdens must
be good policy by loans. For as the governments acquire more
stability, and the people more wealth, the former will be able to
raise, and the latter to pay, much greater sums than can at present be
expected.
What has been said on the general nature and benefit of public loans,
as well as their particular utility to this country, contains more of
detail than is necessary for the United States in Congress, though
perhaps not enough for many of those to whose consideration this
subject must be submitted. It may seem superfluous to add, that credit
is necessary to the obtaining of loans. But among the many
extraordinary conceptions which have been produced during the present
revolution, it is neither the least prevalent nor the least
pernicious, that foreigners will trust us with millions, while our own
citizens will not trust us with a shilling. Such an opinion must be
unfounded, and will appear to be false at the first glance; yet men
are, on some occasions, so willing to deceive themselves, that the
most, flattering expectations will be formed from the acknowledgement
of American independence by the States-General. But surely no
reasonable hope can be raised on that circumstance, unless something
more be done by ourselves. The loans made to us hitherto, have either
been by the Court of France, or on their credit. The government of the
United Netherlands are so far from being able to lend, that they must
borrow for themselves. The most, therefore, that can be asked from
them, is to become security for America to their own subjects; but it
cannot be expected that they will do this, until they are assured and
convinced that we will punctually pay. This follows necessarily from
the nature of their government, and must be clearly seen by the
several States as well as by Congress, if they only consider what
conduct they would pursue on a similar occasion. Certainly Congress
would not put themselves in a situation, which might oblige them to
call on the several States for money to pay the debts of a foreign
power. Since then no aid is to be looked for from the Dutch
government, without giving them sufficient evidence of a disposition
and ability to pay both principal and interest of what we borrow; and
since the same evidence which would convince the government must
convince the individuals that compose it, asking the aid of government
must either be unnecessary or ineffectual. Ineffectual before the
measures are taken to establish our credit, and unnecessary
afterwards.
We are, therefore, brought back to the necessity of establishing
public credit; and this must be done at home before it can be extended
abroad. The only question which can remain, is with respect to the
means. And here it must be remembered, that a free government whose
natural offspring is public credit, cannot have sustained a loss of
that credit, unless from particular causes, and therefore those causes
must be investigated and removed, before the effects will cease. When
the continental money was issued, a greater confidence was shown by
America than any other people ever exhibited. The general promise of a
body not formed into, nor claiming to be a government, was accepted as
current coin; and it was not until long after an excess of quantity
had forced on depreciation, that the validity of these promises was
questioned. Even then the public credit still existed in a degree, nor
was it finally lost until March, 1780, when an idea was entertained
that government had committed injustice. It is useless to enter into
the reasons for and against the resolutions of that period. They were
adopted, and are now to be considered only in relation to their
effects. These will not be altered by saying that the resolutions were
misunderstood, for in those things which depend on public opinion, it
is no matter, (so far as consequences are concerned,) how that opinion
is influenced. Under present circumstances, therefore, it may be
considered as an incontrovertible proposition, that all paper money
ought to be absorbed by taxation, or otherwise, and destroyed before
we can expect our public credit to be fully reestablished; for so long
as there be any in existence, the holder will view it as a monument of
national perfidy.
But this alone would be taking only a small step in the important
business of establishing national credit. There are a great many
individuals in the United States, who trusted the public in the hour
of distress, and who are impoverished, and even ruined by the
confidence they reposed. There are others whose property has been
wrested from them by force to support the war, and to whom
certificates have been given in lieu of it, which are entirely
useless. I need no inspiration to show that justice establishes a
nation. Neither are the principles of religion necessary to evince
that political injustice will receive political chastisement.
Religious men will cherish these maxims in proportion to the
additional force they derive from divine revelation. But our own
experience will show, that from a defect of justice this nation is not
established, and that her want of honesty is severely punished by her
want of credit. To this want of credit must be attributed the weight
of taxation for the support of the war, and the continuance of that
weight by the continuance of the war.