The United States of America Part 7

This summer of 1789 was a time of anxiety for the friends of the new Government. They could scarcely hope that the new machinery had no flaw. At any moment an unforeseen defect might bring the whole to a standstill. Friction fatal to continued happiness might arise between the different departments of the General Government or between it and the component States. The people of some section might refuse to be bound by the General Government. During the heat of debate in the South Carolina Convention, a delegate had defiantly declared that his people would not take part in the new Government, if adopted, if not compelled to do so by force; unless a standing army which the new autocrat would possess should ram it down their throats with the points of bayonets, like the Turkish Janizaries enforcing despotic laws. As time went on and none of these calamities happened, a general confidence took possession of the people. At last they had come into a time of general agreement which would allow the experiment of self-government a fair test. Two States remained out of the Union, but time was expected to bring them in.

CHAPTER VIII

SUMMONING THE GENII OF THE IMPLIED POWERS

Even before the executive part of the new Government had been initiated, Congress attacked the most serious problem it had received from its predecessor. All were agreed that the chief difficulty in carrying on the Revolutionary War had been the lack of sufficient funds. The administration of the Articles of Confederation had been hampered constantly by the same need. The nation was even now millions upon millions of dollars in debt. In order to pay the interest on the French and Spanish loans it had been the custom for several years to borrow more money from the Dutch bankers. This was accomplished with no little difficulty. From the same source John Adams had secured funds with which to install the Government under the Const.i.tution. The President-elect had been compelled to borrow money from a neighbour at Alexandria to meet the expenses of his journey to the capital to be inaugurated.

Public credit both at home and abroad was in ill-repute. To meet the foreign interest and installments due in 1789, over four million dollars must be raised. "Not worth a continental," sighed the merchant as he turned over a heap of depreciated Continental currency in a corner of his strong box. "Acknowledgment to pay by the 'untied States,'" said the owner of a pile of worthless United States certificates of indebtedness. His patriotic zeal in lending money to the National Government in her hour of need now bade fair to ruin him. The veteran of the Revolutionary War carried his half-pay certificate to the money-lender, glad to get even five shillings in the pound for it.

Holders of various forms of State indebtedness besieged their State authorities for payment, rapidly approaching a point where they would welcome any agency which would get them their due.

According to Madison, the Continental Congress had chosen such an unseasonable date as the first Wednesday in March for beginning the new Government in the hope of levying a duty at once which would catch the spring importations of goods from Europe. It was this purpose which brought him to his feet in the House of Representatives on the eighth day of the first session to introduce a subject which he declared to be of the first magnitude, and one that required their first attention and their united exertions. This was the deficiency in the national treasury. For a remedy, he had chosen an impost on certain imported goods.

Fortunately, an impost was not a novelty requiring time and instruction to secure. Imposts had been inst.i.tuted generations before to obtain funds for clearing the seas of pirates and for making safe the merchant marine. Because of these laudable objects, imposts had come to be regarded as a legitimate form of external taxation and as a means of raising a revenue to meet the expenses of government. The American people had been familiar with imposts from colonial times; they had been commonly levied by individual States since independence; and they had been a.s.sociated in thought with the National Government in the vain attempts to revise the Articles by giving it this method of raising a revenue. "To lay and collect imposts" was indisputably stated in the Const.i.tution as a power of the Federal Government. All that was necessary to do was to determine what goods should be liable to a duty and what the amount of duty should be.

Madison submitted for specific duties a fixed list of articles, which the Congress had determined upon in 1783, at the time it was requesting the States to allow it to collect a duty. The list was made up of rum, mola.s.ses, wine, tea, pepper, sugar, cocoa, and coffee. These were regarded at the time as luxuries likely to be consumed by those able to pay the duty. Other imported articles were to have an ad valorem duty. Madison had in mind, as he said, a productive tariff to secure money for the bankrupt national treasury. If more money was needed, the rates could be raised at any time. But early in the debate a member from Pennsylvania moved an amendment adding a number of articles to the specified list. They included beef, b.u.t.ter, candles, soap, boots, steel, cordage, nails, salt, tobacco, paper, hats, shoes, coaches, and spices. "Among these," said he, in explaining his motion, "are some calculated to encourage the productions of our country and protect our infant manufactures." At once, members from States which did not produce these articles protested that the addition of an impost would keep out foreign compet.i.tion and make them pay higher prices for the goods.

Other members from States which produced articles in neither list were equally urgent in getting their special products added. The tradesmen, manufacturers, and others of Baltimore sent in a pet.i.tion "to the supreme Legislature of the United States as the guardians of the whole empire," begging them to impose on all foreign articles, which were made in America, such duties as would give a just preference to their labours. The shipwrights of Charleston in a pet.i.tion pictured their distress under the present condition of trade and begged relief by proper legislation. Pet.i.tions soon followed from coach-makers, soap-boilers, snuff-grinders, makers of mathematical instruments, manufacturers of sheepskin trousers--in fact, nearly every form of industry wished to take advantage of this opportunity to secure national where they had formerly been able to get only local protection. The members of Congress described in their letters to friends the fish battles, the salt battles, and other manifestations in legislative halls of the cupidity of mankind when opportunity is once presented.

In this way it came about that the first revenue measure in the first session of the first efficient National Legislature brought the members face to face with the question of the purpose for which government exists. The Declaration of Independence had declared it to be the securing of certain inalienable rights with which men are endowed by their Creator. This French conception of certain abstract and general rights had taken in British and colonial minds the very concrete shape of property. It is scarcely just to say that even unconsciously the British people had inst.i.tuted government for the protection of property and invested interests; but it is within the bounds of truth to say that a large part of the legislation of Parliament, in the formative days of the American colonies, had been inaugurated with this end in view. With the abuses of the monopolies granted by the mother country, the colonists were only too familiar. But the principle had been inherited, and it had been put into practice in the shape of legislative aid granted by colonial a.s.semblies for the inauguration of various commercial and manufacturing enterprises. Sometimes this a.s.sistance had taken the form of money; at other times, of a patent or monopoly granted for a number of years. Pet.i.tions for such aid had been presented to the Continental Congress at various times. It was not strange that they should appear in the new Congress, as has just been described.

Political parties had not yet been developed, but the debates on this first tariff bill showed a strong tendency to sectionalism, arising from the varied interests of an extensive territory. It was a sectionalism which, if it prevailed, would tend to weaken the Central Government, but, if overcome by compromise or force, would strengthen the national authority by the very fact of the victory. At the time the differences of opinion arising from the various parts seemed so irreconcilable that Madison frequently confessed his despair of getting any tariff measure pa.s.sed at the session; so early did the sectional interests appear, which were destined later to threaten seriously the very existence of the Union.

If the distillers of Philadelphia, for example, pet.i.tioned for a greater discrimination in the duties on rum and on mola.s.ses, the citizens of Portland, then in Ma.s.sachusetts, a.s.sured Congress that any duty on the latter commodity would operate injuriously and be attended with pernicious consequences to all the New England States. Once entered upon, this protective policy could not be stopped. By mutually aiding each other, members could get articles added to the protected list more easily than the unorganised opposition could keep them out. By comparing such co-operation with the united efforts by which the first settlers had cleared their fields, the phrase "log-rolling" was invented. Thus it happened that the first import bill, intended by Madison as a measure for raising revenue, was turned virtually into a protective-tariff measure, and was so called in the preamble. Few realised the importance of the change at the time. Madison called it the "collective" bill, and wrote to a friend that it had cost much trouble to adjust its regulations to the varied geographical and other circ.u.mstances of the States. However unconsciously done, the principle of protective-tariff legislation by the National Government had been adopted.

It is prophetic of the future to note that in this first debate a difference of opinion was shown to exist concerning the proper function of government. One speaker cited the history of the ancient world to prove that the protection of industries and the establishment of manufactures was a very proper aim of government. Others held to a contrary opinion. Madison was among those who thought that business should be left to take its natural course without government interference. He said:

"I own myself the friend to a very free system of commerce and to hold it as a truth that commercial shackles are generally unjust, oppressive, and impolitic; it is also a truth that if industry and labour are left to take their own course, they will generally be directed to those objects which are the most productive, and this in a more certain and direct manner than the wisdom of the most enlightened legislature could point out."

This was the voice of the country member, unaccustomed to the fostering hand of government. It was also the voice of the minority. The Const.i.tution had been framed and adopted by the commercial interests generally, who took quite an opposite view of the duty of government toward business.

No one at this time seemed to feel the potency of the protective principle in enlarging the power of the Union. It was unseen until fully developed some thirty years later. Yet to appreciate the full force of this tariff bill of July 4, 1789, with its protective preamble, as a sample of Union-making legislation, one need only consider the grat.i.tude which the National Government has won through such protective measures; the attachment of leading men to the Union from guarding their interests; the acc.u.mulated strength of moneyed interests in time of danger to the Republic; the use made of the tariff in protecting workingmen; the revenue derived from high tariffs, which has been spent on public improvements; and the force of public opinion which has been frequently rallied by both employer and employee to the support of the execution of a national revenue law.

Above all members of the first administration, Hamilton stood for an efficient National Government. He saw opportunity in the administration and interpretation of the written doc.u.ment to correct the weak places which he had sought in vain to avoid when the frame was being made.

A constructive genius by birth, a financier by study, a leader of men by nature, Hamilton had, in the Treasury Department, that function of the new Government which needed the most strengthening, and in its present condition the necessity which would support the strongest measures. Called upon by Congress at the time of its first adjournment to inform them of the exact financial condition of the country, he drew up an exhaustive report showing that the National and State governments together owed something like fifty-two millions of dollars.

The national obligation to-day is twenty times that sum. Its proportion to eighty millions of people is not much less than the fifty-two millions were to the three and a half millions of people who faced the debt of Hamilton's time. But the debt now is of fixed form and a.s.sured payment before it is incurred. The debt which Hamilton presented to Congress was heterogeneous in form and without means of payment. Arguing that a national debt properly funded had contributed largely to the prosperity of Great Britain, Hamilton proposed to collect all these evidences of debt into a national obligation, which would bring interest to its holders until paid. The faith of the United States toward its creditors must be redeemed. To secure a revenue with which to pay this interest and evidently to redeem the princ.i.p.al in addition to meeting the running expenses of the Government was the first task. Hamilton proposed to place additional duties on imported goods and to lay a tonnage on vessels using American ports, the latter of which he estimated would yield more than a million dollars. He would also put an excise on distilled spirits manufactured in the United States and on those imported, both bringing in nearly three million dollars. The profits of the post-office he estimated at almost a million dollars annually, to be applied also to the national expenses.

[Ill.u.s.tration: CERTIFICATE OF DEBT AGAINST THE UNITED STATES. From the Ma.n.u.script Division of the Library of Congress. This was one of the Revolutionary obligations a.s.sumed and paid under Hamilton's financial measures.]

The members of Congress, at the subsequent session, with remarkable unanimity, concurred in these recommendations of the Secretary of the Treasury for the redemption of the national obligations, including both the debt owed to foreign nations and that incurred to domestic holders during the exigencies of the war. But upon another proposition, that the United States should a.s.sume the debts incurred by the several States during the war, there was strong opposition. It was said that such action would lead to speculation and stock-jobbery in buying up these debts and converting them into new forms. The original holders had long since disposed of them to brokers, who would be enriched by national legislation. It was the old clash between the moneyed and the moneyless cla.s.ses. Although the action would be a direct interference of the National Government with State affairs, the debates turned on economic rather than const.i.tutional grounds. If Hamilton had the foresight with which he is credited by his admirers, if he saw that the allegiance of the people would gradually be won away from the States to the Central Government because the latter was redeeming promises which the States had long been endeavouring to meet, if he was taking advantage of the selfishness and cupidity of the deeply indebted States, there is no evidence to show that the States saw or appreciated the danger.

Virginia, whose representatives bore the brunt of the opposition, had a source of revenue in her western lands from which she could easily discharge her obligations, and naturally had no desire to share the liabilities of others. But her State Legislature, after Hamilton agreed with Jefferson to buy off the Virginia opposition in Congress by locating the national capital on the Potomac, protested in strong and exact terms against the State-debts-a.s.sumption proposition. These resolutions recited that the people of Virginia had adopted the Federal Const.i.tution under the impression and upon positive condition that "every power not granted was retained," and that they had read the doc.u.ment in vain to find the right given to a.s.sume the debts of the States. Here, within two years after the adoption of the Const.i.tution, was a State Legislature protesting against the usurpation of power under it. It was the first of many futile protests.

Hamilton, sending a copy of the Virginia resolutions to Jay, saw "the first symptom of a spirit which must either be killed or will kill the Const.i.tution of the United States." He thought the collective weight of the different parts of the Government ought to be employed in exploding the principles they contained. Theoretically, the Legislature of Virginia may have been correct in its att.i.tude; but no theoretical protest could avail against the worthy sentiment that the entire national credit must be restored, backed by the practical demands of the creditors, and by the desires of those who saw an opportunity of investment or speculation.

Those people, both officials and citizens, who took the stand in these formative days of political parties that the Federal Government should be restricted in its workings to the powers expressly given to it in the Const.i.tution, a "strict construction" of that doc.u.ment, as they called it, were generally country bred, of the borrowing rather than the lending cla.s.s, depending upon individual initiative rather than ma.s.s action, strangers to the paternal aspects and fostering hand of government, and inexperienced in the intricacies of finance. Gen. Henry Lee, of Virginia, complained to Madison of the complexity of Hamilton's plan. "It departs," replied Madison, "from that simplicity which ought to be preserved in finance more than anything else." Inability to comprehend naturally breeds suspicion.

Hamilton's followers were, for the most part, from the Northern and Middle States, city dwellers, money-lenders rather than borrowers, business men, and manufacturers, who saw no wrong in having the Government promote the general welfare by legislation. The sudden revival of business which followed the adoption of Hamilton's plan to redeem all the debts seemed to them both natural and legitimate. The other group looked upon the entire matter as a corrupt transaction, contrived by Hamilton, and a prost.i.tution of government from its legitimate purposes. Madison wrote that just before the report came out the value of the various forms of debt rose from a few shillings to eight or ten shillings in the pound, and that emissaries were still exploring the interior and distant parts of the Union in order to take advantage of the ignorance of the holders. To meet the occasion Jefferson invented the phrases, "corrupt squadron," "stock-jobbing herd," and "votaries of the treasury," upon which he rang the changes during a long lifetime.

To this indignation was added dismay when the effects of national a.s.sumption of State obligations began to be appreciated; when creditors who had besieged the State treasury for years found the Union satisfying their just demands; when the evidences of national government, which had heretofore been confined to a wandering Congress, began to appear at every hearthstone. A realisation of these results brought from Jefferson the complaint that he had been duped by Hamilton in the a.s.sumption-capital bargain; that he had been "most innocently and most ignorantly made to hold the candle for a wicked scheme."

A similar aggrandis.e.m.e.nt of the National Government was the motive, according to the eulogists of Hamilton, which prompted him to make a suggestion for another novelty, a United States bank. Ostensibly he claimed that it would have the effect of bringing immediate financial relief, as well as safeguarding the future. The arguments presented by him to Congress for the incorporation of a bank in which the National Government should be a stockholder were purely utilitarian. The bank would benefit the public by offering an opportunity for the investment of capital. It would benefit the Government by lending it money in an emergency and by collecting its revenues. Its notes would also form a circulating medium. The bill drawn by Hamilton incorporating such a bank pa.s.sed the Senate without material change and without a division.

One Senator from Pennsylvania, suggesting amendments to his colleague, was informed that Hamilton's father-in-law, a Senator from New York, had said Hamilton did not wish the bill altered. The hopeless minority in the Senate claimed that the chances of subscribing to the proposed bank, guaranteeing an investment at six per cent, for twenty years, won many to its support. They also saw here another link in the chain which Hamilton was welding about the States. The debts having been a.s.sumed, the certificates would be accepted as subscriptions to bank stock. Thus one measure would be made to play into another.

In the House, the right of the Federal Government to found a bank was attacked by Madison, who here parted from Hamilton, with whom he had laboured in getting the Const.i.tution adopted. The line-up of parties had begun. Madison found himself opposed to the way in which the Government was being perverted by Hamilton under the Const.i.tution. His speech is the first extensive exposition of the doctrine of strict construction of the written instrument; that the central power must be held strictly to the powers numerated in the doc.u.ment. Strict construction exhibits the vice of a written Const.i.tution--the impossibility of growth or even continued life within the bonds of the written word. Stagnation and death must result from binding the limbs of the body politic. Loosening by interpretation is the remedy. Madison was correct in saying that the right to incorporate bodies was proposed in the Philadelphia Convention and abandoned; that the power to incorporate a bank was nowhere given in the Const.i.tution to the Federal Government; that banking was presumed to be a matter for State control; that in all the debates and papers written on the Const.i.tution it was understood that "the powers not given were retained; and that those given were not to be extended by remote implications."

In reply, Boudinot did not deny that all powers, vested heretofore in any individual State, and not granted by this instrument, were still retained by the people of such State and could not be exercised by Congress. But he then showed that the power to incorporate the bank was "drawn by necessary implication" from those expressed. The preamble declared in general terms the objects of the Const.i.tution; one of the expressed functions under it was "to borrow money"; and the circle was completed by the liberal clause to "make all laws necessary and proper for carrying into execution the foregoing powers." Now to provide for the general welfare it might be necessary to borrow money; a bank was essential to the borrowing of money in adequate sums; therefore the power to establish a bank was deduced by the strongest and most decisive implication.

Here was the first complete exposition of the doctrine of a loose construction for the wording of the Const.i.tution. If that be correct reasoning, said the opposition, the Const.i.tution may as well stop with the preamble, since there is no power under heaven which could not be exercised within its limits. It would mean the consolidation of all powers, and the practical extinction of local government. The att.i.tude of the two sides in the debate may be shown by one ill.u.s.tration employed. Suppose the power to make a treaty or to raise an army had been omitted from the Const.i.tution, asked the Hamiltonians, could the National Government in an emergency a.s.sume such rights from the preamble and the powers expressed? Must it hesitate and temporise while the blood of its citizens was being shed? Such an a.s.sumption of power, replied the strict interpreters, might be excusable in an emergency, but could be warranted as a practice only by an amendment to the Const.i.tution made in the manner it prescribed.

The present situation and the compelling force which had produced it were manifest when those who favoured giving the Union such implied powers as would make it effective pointed out many instances of implication of which Congress had already been guilty; such as accepting land for lighthouses, defining crimes under power to establish courts, and even creating corporations in the shape of the North-West and the South-West territories. One of these lesions of the written word, that which interpreted a clause so as to give the President power over removals from office, Madison himself had favoured.

This first const.i.tutional debate also outlined the geographical sectionalism which has penetrated and influenced every feature of American political as well as commercial and social life. The Northern and Middle States contained the cities, made up of the trading cla.s.s, whose capital was chiefly in ready money. The capital of the rural dwellers of the South was in land and slaves, not easily converted into cash. The latter became the borrowing, the former the lending section. The spirit of unionism was engendered in the first by reason of their urban life, their commercial employment, and their frequent contact in business. The feeling of individualism was as naturally bred in the latter by their rural surroundings, their agricultural occupation, and the self-reliance induced by their solitary environment.

The opposition to the Const.i.tution in Ma.s.sachusetts, Rhode Island, New York, and Pennsylvania had been confined almost entirely to the country.

The rural States of Virginia, North Carolina, and South Carolina did not adopt the new frame without a struggle. Georgia was a Southern exception; but population dwelt so exclusively along the coast in the new State of Georgia that it was really a commercial State, settled largely by New Englanders.

The mercantile cla.s.s of the Northern and Central States, after Anti- Federalism had been silenced by the success of the new Government, was ready to adopt the theory of loose construction or interpretation by inclusion, which would tend toward the realisation of a more potent union. At the same time, a bank, supported by the patronage of the National Government, with no danger of compet.i.tion for twenty years, offered not only a security for capital against such dangers as it had previously known, but also, through its branches, an extended agency for transacting business. Many details of the bill, such as the advantages given to holders of national rather than State certificates in subscribing for stock, contributed to the sectional division. The national certificates were held in the commercial centres. The influence of the city of New York, where the Congress met, no doubt contributed to the pa.s.sage of the bank and other commercial measures.

Precisely the opposite feelings held in the Southern States. Every vote cast in the House against the bank came from Maryland or a State to the south of it. There were a few scattering votes from the Southern States in favour of the measure, but as a whole political lines were here unconsciously drawn for a century to come, if not for the entire existence of the Republic. The "court and country" parties of colonial days had been born again.

Many of the members were surprised to find sentiment toward these financial measures a.s.suming such a sectional trend. Sectional interests had been only too manifest in the convention, but compromises had settled them, presumably for ever. Compromise is only a relief; it is never a remedy. After each compromise in American history it has been a matter of surprise to the partic.i.p.ants that others were needed. On the bank bill, a member wrote to a correspondent: "You may think it unaccountable, but so it is that the differences in climate seem to govern the opinions on this bill, and Potomac seems to be near the dividing line with few exceptions."

Virginia was the leader of the section south of the Potomac, and Jefferson was the leader of Virginia. Although debarred from the congressional debates by his Cabinet position, he filled his letters to his friends with warnings against the dangerous a.s.sumptions of the Hamilton measures. In response to Washington's inquiry to his Cabinet upon the const.i.tutionality of the bank, Jefferson drew up a paper setting forth in strong terms his opinion that the Central Government had no power to engage in business. Hamilton presented an equally strong argument for the bank in his reply.

Madison, the leader of individualism in the House, could not agree with Hamilton's interpretation of the "general welfare" clause of the Const.i.tution. The former co-labourers for efficient government parted at this point. Madison thought the adoption of such an interpretation would change the National Government from a limited one, possessing certain specified powers, to an indefinite one, subject only to particular exceptions. The phrase concerning "the general welfare" had been taken from the Articles, he said, where it was understood to be nothing more than a general caption to specified powers, and had been retained because it was less liable to misconstruction than any other.

Whatever had been the original intent, the spirit of the implied powers had been summoned from the vasty deep of uncertainty to aid in making a confederated republic from confederated States.

CHAPTER IX

NATIONAL CENTRALISATION

No one can accuse Hamilton of failing to take advantage of these formative years in giving the new Government a strong bias toward centralisation. Although opposed by Jefferson, Madison, and Richard Henry Lee, Hamilton had the a.s.sistance of Knox, and frequently of Randolph, in the Cabinet, as well as Fisher Ames and others in Congress.

He also possessed the esteem and confidence of the President, and the advantage which the commercial environment of New York as well as the influence of the Schuyler family alliance could give him.

Among his numerous suggestions to Congress for cancelling eventually the eighty million dollars of the national debt, to which business men of the Northern States were subscribing freely, was an excise. Although this debt, the "Hamiltonian debt," as the Jeffersonians called it, was an iniquitous burden saddled upon the common people, an excise was to them a most offensive way of meeting it. Being for the most part agriculturists and country people, accustomed in regions far from markets to manufacture their grain into spirits, they were not likely to be persuaded that the consumer pays the tax in the end. It was a direct tax, and, although const.i.tutional, in form the most obvious and objectionable. To have an inspector prying into your private affairs in this manner was in ill-accord with the freedom for which America stood. To put a tax on a still and its product was to them equivalent to taxing their hand-mills and the meal or flour thus produced.

Having secured the pa.s.sage of the excise tax as a permanent source of income, Hamilton turned to meet the most pressing national obligations.

To pay the interest on the foreign debt, he had arranged a loan from Holland. To provide money for circulation at home he revived the oft-repeated project of a national mint, which should coin gold, silver, and copper coins of a decimal denomination, the gold bearing a ratio to the silver of one grain to fifteen grains. This ratio he arrived at by making a computation of the respective amounts of these two metals available in the world. It is interesting to note that the ratio has changed but little in a century. Hamilton also drew up an exhaustive report on the sources and conditions of American manufactures, with a strong plea for the encouragement, by a protective tariff, of such industries as had already been established.

The influence of Hamilton and the Federalist majority in both branches of Congress made possible the adoption of these so-called "Hamilton measures" as rapidly as they were suggested by him. They have been praised, and justly praised, because they restored the public credit of the National Government both at home and abroad. The receipts for the first time met the expenditures. Never before had the national resources been so adequately provided and so judiciously administered.

Hamilton's financial measures must also be praised because they first demonstrated the efficiency of the new Government over the old form.