TO THE PRESIDENT OF CONGRESS.
Office of Finance, March 8th, 1783.
Sir,
I received yesterday afternoon a report, which is to be considered on Monday the 10th instant, and with it I received an order to transmit my observations. The shortness of the time obliges me to ask indulgence for deficiencies or inaccuracies. I have always believed that Congress were disposed to do justice to the public creditors, and I shall presume that the power of Congress will be exerted for that purpose.
There appear, therefore, two principal points to be considered.
I. What justice requires; and,
II. What Congress have power to do.
To the first I answer. Justice requires that the debt be paid. The principles of justice require that from a government, which a court of justice exacts from an individual. Government have no right to oblige creditors to commute their debts for anything else. Any revenues, therefore, to be pledged for the restoration of public credit must be such, that money may be borrowed on them to pay those to whom it is due; any plan which falls short of that object will not do justice. And no plan will embrace that object unless it be such that under it individuals would prefer government security to any other. In our particular situation it appears clear, that such public creditor has a complete right to demand his whole debt from Congress, and to name the terms on which he will forego it, and that Congress have a similar right in regard to the States.
In order to determine on the second question, viz. the power of Congress, we must resort to the confederation. By the eighth article it will appear, that Congress have a right to determine on the sum to be paid by the States, and the time of payment; and that this sum is to be paid by the States in proportion to their respective value, or an estimation to be made in the mode to be appointed by Congress. It is, therefore, in the power of Congress to call for payment of the whole debt by any day; such for instance as the 1st of January; and to have a valuation made some previous day; such for instance as the 1st of September. The right of Congress is perfect, and the duty to pay absolute. It appears necessary that this power be exerted in the most decisive form, and that whatever general plan of finance may be adopted, the concurrence of each State in such plan should be admitted as an alternative for not paying her apportioned quota of the whole debt. My reasons are these.
1st. It will not be believed, that Congress have no power to do justice until the power which they have is exerted.
2dly. The public creditors have a right to expect that exertion.
3dly. Until it be made, a compliance with the demands of Congress will be considered by the States as a matter of favor and not of right.
4thly. Congress having a right to the whole money, it follows that they have the exclusive right to name those precise terms on which they will commute it.
5thly. Hence it follows that their plan, (be it what it may) must be adopted by the States in all its parts, because none of them can have a right to make amendments.
6thly. The objections heretofore raised against the impost will by this means be totally done away, because each State may at its option either comply with the general plan or pay her particular share of the whole debt.
7thly. If the plan proposed as an alternative be adopted, it will from the nature of the case be an express national compact between the United States and each individual State. The revenue will have been purchased by Congress and they will have a perfect right to insist on their bargain.
8thly. The plans of Congress will by this means be greatly facilitated in the States, because the arguments will apply to men's feelings, and they will at once perceive, that it is better to give a permanent revenue of six, than make immediate payment of a hundred. Every term and condition in the plan will then be fair, because if the revenues be such as in the judgment of the Legislature will fall too heavy on their constituents, they can adopt others, borrow on their own account, and pay in their share at the day named. So that the United States will either receive the whole money, and pay all their debts, or they will get solid revenues to fund the whole, or they will receive a part and have such revenues for the remainder.
It also appears to me that our situation requires the utmost despatch, and therefore I wish much that the days named should be shorter than those above mentioned. The Act of the 17th of last month has been duly forwarded to the several States, but there will be no impropriety in taking a shorter mode of valuation for apportioning the debt, and leaving the valuation by the Act of the 17th to apply to the yearly apportionments subsequent to the last year. Various modes of making a speedy valuation might be suggested; such for instance, as that Congress should appoint a commissioner for each State, directing them to meet at this place on the 1st of June and determine, that the valuation made by the majority of those who do meet should be conclusive. If such a line of conduct as this be pursued, those suspicions as to the integrity of Congress, which ill designing men have endeavored to raise must immediately cease. And if justice be not done, public indignation will be pointed to the proper persons.
With respect to the alternative which may be proposed, I am sorry to find that my ideas as to the objects of revenue have not met with the approbation of Congress. I must be indulged in observing, that let the revenues be what they may, it is indispensable that all the collectors be appointed by the authority of the United States, and for the following reasons.
1st. Experience has shown, that the taxes heretofore laid in the States have not been collected.
2dly. It is evident from a consideration of their modes of taxation, (which they are all very obstinately attached to,) that they never will be punctually collected.
3dly. The punctuality in the payment of interest is essential to public credit.
4thly. As Congress forego their right to insist on the principal, it is but just that they should have every possible security for the interest.
5thly. As the people are in either case to pay the supposed tax at certain periods it must be a matter of indifference to what particular man the payment is made.
6thly. The objection raised in favor of elected tax gatherers, viz. that they consider the circumstances of the people, which is saying in other words, that they are guilty of favor and partiality, is the strongest reason why the collectors should be appointed by, and amenable to, Congress.
7thly. It is a kind of absurdity in itself, that Congress should have a right to the tax, and yet no right to send their servants to receive it.
I pray leave also to observe, that the revenues must be co-existent with the debt. No man in his senses will lend on any other terms. If the revenue be only for a fixed period of time, no more can be borrowed on it than the price of an annuity for such a time. And it has already been observed, that money must be borrowed to pay the public creditors, because they have a just right to their money. Another observation on this subject I must take the liberty to impress. The more clear, certain, permanent, and increasing the funds are, the lower will be the interest at which money can be borrowed. If the funds be very good, money may be borrowed at four per cent, perhaps at three per cent. If they are not good it will not be procured for less than six, seven, or eight per cent, and perhaps not at all. Proper reflections on this subject will naturally suggest themselves, and it will not be forgotten, that whether the debt be less or greater, and whether the interest be higher or lower the people must pay all.
With respect to the impost I conceive it to be justly exceptionable, because that an estimation ad valorem is arbitrary, and the law ought in all cases to be clear and explicit. The impost on prizes need not, I should suppose, be asked for, because Congress may take measures for the purpose themselves whenever the occasion requires. I conceive also, that a tax might be laid on exports which, without being burdensome, would still be productive. Enclosed is a list of rates, which I take the liberty to submit. I cannot go into a written detail of the reasons for them, because my time will not permit.
I am told that the principal objection to a land tax is the inequality. To obviate this objection (although I cannot accede to the force of it) perhaps a reduction of the sum from one dollar to a quarter of a dollar per hundred acres might be expedient; and to supply the deficiency, a tax on houses might be adopted, according to the enclosed rate, which I also beg leave to submit.
I must take the liberty to declare my most serious apprehensions from the existence of unsettled accounts among the States. Everything which tends to create or continue them is fraught with ruinous consequences. Keeping accounts of moneys paid by taxes of the States, and liquidating those accounts by after settlements, will, I fear, prove the source of much dissension. It will operate as heretofore in preventing the States from paying anything. I would pray therefore to submit to Congress the following mode of terminating all present accounts, viz. that the whole sum paid or expended by each State, for the public service from the commencement of the war, should be placed to the credit of the particular State, and each draw interest on such sum. By these means the whole account would be equitably settled in the first instance. The States which are indebted on their own private account, would be able to wipe off such debts by an assignment of national stock. And on the first requisitions made by Congress for current expenditures, each might make payment either in part, or perhaps in the whole, by a discharge of so much of the debt. Thus a degree of simplicity would be introduced into our affairs, and we might avoid the horrors of intestine convulsions.
I have the honor to be, &c.
ROBERT MORRIS.