STATE SECURITY FOR UNITED STATES LOANS.

Moultrie, Ohio.

Was there a time in the history of our General Government when its credit was so low that it was necessary for one or more States to go security for a loan made by it?

S. R. Roose.

Answer.—There has been no such time since the adoption of the present Constitution. The nearest the Federal Government ever came to such a humiliation was in 1860, when, through the cutting down of the tariff in 1857 and the outrageous expenditures during President Buchanan’s administration, the National debt had swelled to over $64,000,000, and money could not be raised on United States Treasury notes at less than 10, 11, and finally 12 per cent interest. Then John A. Dix, who succeeded Cobb as Secretary of the Treasury, about the close of 1860, found the public credit so low that, in desperation, he recommended to the Committee of Ways and Means that the States be asked to secure the repayment of money which the government should borrow, by pledging the repayment for this purpose of the public deposits received by them in the distribution of the surplus in the United States Treasury in 1836. However, Congress did not adopt this recommendation.

During the revolutionary times, before and under the old Articles of Confederation, Congress had no authority to levy and collect taxes and customs dues, as it has now. Various plans for raising money were discussed, all dependent on the sanction of the several colonial or State Legislatures. The first plan resorted to for using the credit of the General Government was to issue paper money. Three modes of doing this were considered: First, “That every colony should strike for itself the sum apportioned by the Continental Congress; secondly, that the Continental Congress should strike the whole sum necessary, and each colony become bound to sink its proportionable part; thirdly, that the Continental Congress should strike the whole sum, and apportion the several shares to the different Colonies,” every Colony becoming bound to discharge its own particular part, and all the Colonies to discharge the portion which any particular Colony should be unable to pay. The views of the delegates were widely divergent, but Congress decided, June 22, 1775—more than a year before the Declaration of Independence—to issue bills of credit, not exceeding 2,000,000 Spanish milled dollars, pledging the faith of the twelve Confederate Colonies for their redemption. The sum was subsequently increased to $3,000,000, and apportioned, on the basis of population, among the Colonies that had joined the confederation—not then including Georgia—as follows:

Colonies.Amount.
New Hampshire$124,069.50
Massachusetts Bay434,244.00
Rhode Island71,959.50
Connecticut48,139.00
New York245,139.00
New Jersey161,290.50
Pennsylvania372,208.50
Delaware37,219.50
Maryland310,174.50
Virginia496,278.00
North Carolina248,139.00
South Carolina248,139.00

Each Colony was to pay its respective quota in four equal annual installments, commencing on the last day of November, 1779; and for this purpose each was to levy and collect taxes. But, though from first to last the States insisted upon retaining the power to tax, and Congress was obliged to trust wholly to them for funds raised in this manner, they did not tax themselves, as they were in duty bound to do, and neither contributed as they should have done to sustain the National Government, nor raised much to sustain their own organizations, civil and military. “Throughout the entire period from 1774 to 1789,” says Bolles, “only very small sums flowed into the general treasury from the State treasuries.”

In the spring of 1780 Congress resolved, after a great many whereases, “to receive silver and gold in payment of the quotas assigned to the States, at the rate of one Spanish milled dollar in lieu of $40 of the bills then in circulation.” Subsequent loans were made, and the debt apportioned among the several States; but the latter paid but a trifling part of their assessments, as shown by the following table, giving the assessment on each State on account of the requisition of Congress for $8,000,000 in November, 1781, and the amount actually paid to the end of 1783, as given in “Bolles’ Financial History of the United States,” vol. I.:

State.Assessment.Am’t paid.
New Hampshire$373,598$3,000.00
Massachusetts1,307,596247,676.66
Rhode Island216,68467,847.95
Connecticut747,196131,577.83
New York373,59839,064.01
New Jersey485,679102,004.95
Pennsylvania1,120,794346,632.98
Delaware112,085
Maryland993,99689,302.11
Virginia1,307,594116,103.53
North Carolina622,677
South Carolina373,598344,301.57
Georgia24,905
$8,000,000$1,486,154.71