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a proper provision, respects the quantum of the debt, and the present rates of interest.

The debt of the Union is distinguishable into foreign and domestic.

The foreign debt, as stated in schedule B,

amounts to, principal,

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Bearing an interest of four, and partly an interest of five per cent.

Arrears of interest to the last of December,

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The domestic debt may be subdivided into
liquidated and unliquidated; principal and
interest.

The principal of the liquidated part, as stated
in the schedule C, amounts to
Bearing an interest of six per cent.

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The arrears of interest, as stated in the schedule D, to the end of 1790, amount to

Making, together

$10,070,307 00

1,640,071 62

$11,710,378 62

$27,383,917 74

13,030,168 20

$40,414,085 94

The unliquidated part of the domestic debt, which consists chiefly of the continental bills of credit, is not ascertained, but may be estimated at 2,000,000 dollars.

These several sums constitute the whole of the debt of the United States, amounting together to $54,124,464 56. That of the individual States is not equally well ascertained. The Secretary, however, presumes that the total amount may be safely stated at twenty-five millions of dollars, principal and interest. . . .

On the supposition that the arrears of interest ought to be provided for on the same terms with the principal, the annual amount of the interest, which, at the existing rates, would be payable on the entire mass of the public debt, would be

On the foreign debt, computing the interest on the
principal, as it stands, and allowing four per
cent. on the arrears of interest,
On the domestic debt, including that of the States
Making, together,

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$542,599 66 4,044,845 15 $4,587,444 81

The interesting problem now occurs: Is it in the power of the United States, consistently with those prudential considerations which ought not to be overlooked, to make a provision equal to the purpose of funding the whole debt, at the rates of interest which it now bears, in addition to the sum which will be necessary for the current service of the Government?

The Secretary will not say that such a provision would exceed the abilities of the country; but he is clearly of opinion that, to make it, would require the extension of taxation to a degree, and to objects, which the true interest of the public creditors forbids. It is therefore to be hoped, and even to be expected, that they will cheerfully concur in such modifications of their claims, on fair and equitable principles, as will facilitate to the Government an arrangement substantial, durable, and satisfactory to the community. . . .

Probabilities are always a rational ground of contract. The Secretary conceives, that there is good reason to believe, if effectual measures are taken to establish public credit, that the Government rate of interest in the United States will, in a very short time, fall at least as low as five per cent.; and that, in a period not exceeding twenty years, it will sink still lower, probably to four. There are two principal causes which will be likely to produce this effect; one, the low rate of interest in Europe; the other, the increase of the moneyed capital of the nation, by the funding of the public debt. . . .

Premising these things, the Secretary submits to the House the expediency of proposing a loan, to the full amount of the debt, as well of the particular States as of the Union, upon the following terms:

First. That, for every hundred dollars subscribed, payable in the debt, (as well interest as principal) the subscriber be entitled, at his option, either to have two-thirds funded at an annuity or yearly interest of six percent., redeemable at the pleasure of the

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Government, by payment of the principal, and to receive the other third in lands in the western territory, at the rate of twenty cents per acre; or, to have the whole sum funded at an annuity or yearly interest of four per cent., irredeemable by any payment exceeding five dollars per annum, on account both of principal and interest, and to receive, as a compensation for the reduction of interest, fifteen dollars and eighty cents, payable in lands, as in the preceding case; or, to have sixty-six dollars and two-thirds of a dollar funded immediately, at an annuity or yearly interest of six per cent., irredeemable by any payment exceeding four dollars and two-thirds of a dollar per annum, on account both of principal and interest, and to have, at the end of ten years, twenty-six dollars and eighty-eight cents funded at the like interest and rate of redemption; or, to have an annuity, for the remainder of life, upon the contingency of fixing to a given age, not less distant than ten years, computing interest at four per cent.; or, to have an annuity, for the remainder of life, upon the contingency of the survivership of the youngest of two persons, computing interest in this case also at four per cent.

In addition to the foregoing loan, payable wholly in the debt, the Secretary would propose that one should be opened for ten millions of dollars, on the following plan:

That, for every hundred dollars subscribed, payable one half in specie, and the other half in debt, (as well principal as interest) the subscriber be entitled to an annuity or yearly interest of five per cent., irredeemable by any payment exceeding six dollars per annum, on account both of principal and interest. [The details of these various plans are then discussed at length.]

In order to keep up a due circulation of money, it will be expedient that the interest of the debt should be paid quarter-yearly. . . .

The remaining part of the task to be performed is to take a view of the means of providing for the debt, according to the modification of it which is proposed.

...

. . . to pay the interest of the foreign debt, and to pay four per cent. on the whole of the domestic debt, principal and interest, forming a new capital, will require a yearly income of $2,239,163,09 - the sum which, in the opinion of the Secretary, ought now to be provided, in addition to what the current service will require.

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With regard to the instalments of the foreign debt, these, in the opinion of the Secretary, ought to be paid by new loans abroad. Could funds be conveniently spared from other exigencies, for paying them, the United States could illy bear the drain of cash, at the present juncture, which the measure would be likely to

occasion.

But to the sum which has been stated for payment of the interest, must be added a provision for the current service. This the Secretary estimates at six hundred thousand dollars, making, with the amount of the interest, two millions eight hundred and thirty-nine thousand one hundred and sixty-three dollars and nine

cents.

This sum may, in the opinion of the Secretary, be obtained from the present duties on imports and tonnage, with the additions which, without any possible disadvantage, either to trade or agriculture, may be made on wines, spirits, (including those distilled within the United States) teas and coffee. [A discussion of this point, with a detailed statement of the proposed duties, follows.]

No. 56. Proclamation of Neutrality

April 22, 1793

THE declaration of war made by France against Great Britain and Holland reached the United States early in April, 1793. Washington was at Mount Vernon. April 12 he addressed letters to the Secretaries of State and of the Treasury, "requesting their immediate attention to the question of privateering"; on the 17th he reached Philadelphia. On the following day Washington sent to the members of the cabinet a circular letter containing thirteen questions, framed by Hamilton, relative to the proper conduct of the United States in view of a European war. The members of the cabinet, with the Attorney-General, met on the 19th at Washington's house, and unanimously decided in favor of the issuance of a proclamation of neutrality. Randolph was directed to draw up the proclamation; on the 22d it was submitted to the President, approved, signed, and ordered to be published. The proclamation was communicated to Congress Dec. 3.

REFERENCES. Text in Amer. State Papers, Foreign Relations, I., 140. Washington's letter to the cabinet, and the accompanying questions, are given in Sparks, Writings of Washington, X., 337, 533, 534. Jefferson's

account of the cabinet meeting at which the proclamation was discussed is in his Works (ed. 1854), IX., 142, 143; for his own views on the subject, ib., IV., 17-20, 29-31. For the controversy between Hamilton and Madison, under the names of "Pacificus" and "Helvidius," see Hamilton's Works ed. 1851), VII., 76-117, and Madison's Writings (ed. 1865), I., 611–654.

WHEREAS it appears that a state of war exists between Austria, Prussia, Sardinia, Great Britain, and the United Netherlands, of the one part, and France on the other; and the duty and interest of the United States require, that they should with sincerity and good faith adopt and pursue a conduct friendly and impartial toward the belligerent Powers:

I have therefore thought fit by these presents to declare the disposition of the United States to observe the conduct aforesaid towards those Powers respectively; and to exhort and warn the citizens of the United States carefully to avoid all acts and proceedings whatsoever, which may in any manner tend to contravene such disposition.

And I do hereby also make known, that whosoever of the citizens of the United States shall render himself liable to punishment or forfeiture under the law of nations, by committing, aiding, or abetting hostilities against any of the said Powers, or by carrying to any of them those articles which are deemed contraband by the modern usage of nations, will not receive the protection of the United States, against such punishment or forfeiture; and further, that I have given instructions to those officers, to whom it belongs, to cause prosecutions to be instituted against all persons, who shall, within the cognizance of the courts of the United States, violate the law of nations, with respect to the Powers at war, or any of them. . . .

GEO. WASHINGTON.

No. 57. Treaty with Great Britain

November 19, 1794

THE non-observance by Great Britain of the provisions of the treaty of 1783 in regard to the carrying away of slaves and the withdrawal of troops led to extended but fruitless diplomatic correspondence. In the autumn of 1793 relations between the two countries were further strained by the admiralty

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