CIRCULAR TO THE GOVERNORS OF THE STATES.
Office of Finance, October 21st, 1782.
Sir,
I have on many occasions warned the States of the consequences which must follow from delays in supplying the treasury. The expense which attends such delays, has frequently been mentioned, and instances daily occur to show, how much the public burdens are increased by the want of a timely provision. To cite them all would be endless; but there is one of no inconsiderable magnitude, which I think it proper to state for your consideration. I had contracted on the part of the United States for the supply of rations to the main army, at ten pence Pennsylvania currency, and to the garrison at West Point for nine pence half penny, and had agreed to pay, at the commencement of each month for the issues of the preceding month.
These beneficial contracts have been dissolved by my inability to make punctual payments, which rendered the contractors incapable of performing their engagements. After many efforts on my part to supply the want of cash, and on their part to substitute private credit and promises in the place of ready money, they found it impracticable to proceed further on the moderate terms stated in the contract. Some of them told me so, and asked (what any persons in their situation would have asked) the promise of indemnification for any damages they might sustain. And a promise to pay at the end of each month, one half the amount of issues for the preceding month in coin, and three times the remaining half in bills or notes receivable in taxes. They offered if I would agree to these propositions, to go on and supply the army; but declared, that if I would not, they could no longer perform their engagements.
From this moment I was obliged to consider the contract as dissolved; because the dissolution of it appeared inevitable. I had already by entering into the contract, promised on the part of the public, a payment of the whole money due for the monthly issues. A new promise of the half would have given no additional security, and therefore I considered that stipulation as a request, that I should on my private and personal honor, assure them the public funds would enable me to make such payments. But of this I had no good prospect. The greater part of what little came in from taxes, was the same kind of paper with that which they asked for, being what I had long before issued for other services. If indeed I could have trusted the assurances made to me, I might have given the assurances required by them. But experience had taught me caution, and the event has shown, that if I had made the promise, I should now have been chargeable with falsehood.
I think the contractors were prudent in requiring a promise of indemnification; their situation made it necessary; but it was a promise which I could not make, for although I had reason to confide in their integrity and would have done it in my private capacity, yet as a public officer, I could not. For there would have been no longer certainty of the extent to which their expenditures might have been carried, after it should have become a matter of indifference to their private interest what prices should be given for supplies.
Thus, Sir, I found myself reduced to the alternative of making a new agreement for subsistence of the army and garrison, or of leaving them to subsist themselves by military collection. The latter was to be avoided, if possible, for it would have been the most expensive mode of obtaining supplies, not to mention other circumstances. The former, therefore, was to be adopted, and I accordingly gave instructions to Mr Cornell, the inspector of the contracts, to consult with the Commander in Chief, and take the necessary arrangements. It could not be expected, that a contract dictated by necessity, could be made on economical terms, and the inability to perform old engagements would necessarily influence the rate of new ones. Besides this, it was indispensably necessary to obtain a longer credit, because otherwise the burden would have been shifted, not removed; and the evil must have returned with equal speed and greater magnitude. Under such unfavorable circumstances, it was necessary to pay for a credit in order to obtain it. A new contract is made, and the rations issued now, are to be paid for three months hence, at the rate of thirteen pence, Pennsylvania currency, for a ration; which is an advance of about one third upon the former price. The public therefore will pay for this advance of moneys, equal to feeding the army at the rate of thirtythree and one third per cent for three months; or, to make the matter more simple, they must pay for feeding them three months, as much as would have fed them four months. Besides this, the public credit sustains material injury, and damages will be expected by the former contractors.