American Finances From 1789 to 1835

II.

THE sinking fund act of 1795, while it made assured and ample provision for reimbursing the six per cent, stock, failed to extend a similar provision to every part and description of the public debt. This omission proved a defect in that important measure; and it was so speedily brought to light that its disturbing influence was at once felt in all the estimates of the year following the one which saw the passing of the act.

Early in the year 1796 intelligence reached this country that the creditors: in Amsterdam and Antwerp had rejected the proposal to convert the foreign debt into a funded domestic stock ; and it was also known that the unsettled position of affairs in Europe, caused by the war then waging, would in the interim preclude any further loans being obtained there. Funds would therefore have to be transmitted abroad, to meet reimbursements on the foreign debt, as stipulated for in the contracts. This unforeseen necessity was of itself sufficiently embarrassing; but it chanced to be further aggravated by a request made about the same time by the directors of the United States Bank, to the effect that the government would take measures for paying the loans already due the bank, and would also provide against any loans falling due in the course of the current year.

Here were sudden and unlooked-for demands upon the treasury, which raised the expenditure for the year 1796 to the extent of several millions of dollars. Yet no provision whatever had been made for discharging these obligations.

The loans made to the government by the Bank of the United States amounted, on January 1, 1796, to $6,000,000. Each of these several loans had been obtained on a pledge of the revenues, with the sole exception of a balance of $1,400,000 yet due on the stock loan of $2,000,000. During the recent troubles, when expenses were mounting up rapidly, any appropriation that called for immediate payment was compelled to be made against newly-levied revenues, which themselves were already subject, on their collection, to credits running from six to twenty-four months. In order, therefore, to procure the money at once, loans designed to be no more than temporary were obtained of the bank, in anticipation of the actual receipt of taxes. As, however, the revenue properly belonging to each year was being kept tied up by reason of the long credits given on the outstanding bonds, the pledged taxes, when they reached the treasury, were all absorbed in defraying the current expenditures. Under these circumstances, the government found itself compelled, in order to keep on hand Sufficient cash funds, to renew the temporary loans, when once they were made; and so it went on, until the debt owing to the bank grew at length to be so enormous as even to paralyze its operations, depriving it, as the fact proved, of nearly two thirds of its capital.

When, therefore, the payment of this debt came eventually to be Insisted on, some method of raising the money had to be devised different from that of taking it from the receipts for the coming year, 1796; for these receipts, although already appropriated to pay the bank, were clearly not available.

In this conjuncture a proposal was submitted to the bank to commute the entire debt into a funded domestic stock, to bear interest at six per cent. This plan met with failure, inasmuch as the bank declined to receive the Stock at its par value. The next move was an attempt to negotiate a sale of the stock ; but the terms offered were so disadvantageous to the government that the loan was withdrawn. Out of this new stock, not redeemable until after the year 1819), only eighty thousand dollars’ worth were sold, for seventy thousand dollars in cash.

As a fresh, resort toward responding to the more urgent demands of the bank, 2780 shares of the bank-stock, at $400 a share, were sold at a premium, realizing thereby $1,384,260. The proceeds of this sale had the effect of satisfying the bank ; and indeed the relief it produced was such as to allow a postponement in discharging the balance of the loans. These were by degrees subsequently paid out of the current revenues. As to the Dutch debt, the installment of $400,000 due upon it the government found itself enabled to pay by an unexpected increase in the revenue from imports and internal duties.

The annual addition to the revenue which would be required, in order to ward off the necessity of having recourse to new loans, was found on computation to be $1,229,000. For the purpose of commanding this amount, duties were laid, under the act of March 3, 1797, on certain imported articles. These duties consisted, in the main, of an increased specific duty on sugar, tea, and molasses, and of an extra ad valorem duty of two and a half per cent. on cotton goods. This increase, combined with an addition of fifty per cent, to the tax on carriages, brought the annual revenue up to nearly $7,500,000. Out of this sum, not only the current service was provided for, but also the interest on the entire debt; and it was found adequate, beside, for paying any installments of the principal that might fall due from the year 1797 to the year 1801. By special appropriation, all proceeds arising from the new tariff duties were set apart for the payment, first, of the principal of the foreign debt, and then of the principal of the debt due to the Bank of the United States.

Scarcely had these arrangements been entered upon when the government found itself on the point of a serious difficulty with France. The spoliations of this power upon our commerce had aroused a determination to protect it. Discretionary powers were conferred on the president in an extra session of Congress, which, in the event of an actual outbreak, were to be employed in such preparations for the conflict as his judgment might deem necessary. In anticipation of this possible expenditure, additional duties were imposed; but as the contingent expenditure was not created, the receipts of the year 1797 produced a surplus of upwards of $1,900,000, which, in accordance with the law, was applied to the reduction of the public debt.

In the year following, the need of giving greater security to American commerce compelled the government to submit to heavy cost, both for military and maritime armaments. Stamp duties wore now laid upon printed and written documents of various kinds; and at the same time there was also placed upon dwellinghouses, lands, and slaves a direct tax of two millions of dollars, which latter tax was apportioned among the States, according to the constitutional rule. A loan of five millions of dollars was likewise authorized; and this loan went to supply the deficit in the current expenses for the years 1798 and 1799, which was caused by the outlay for defensive operations by land and sea.

This loan of five millions of dollars is noteworthy as being the first in the United States that was negotiated of its individual citizens. The times looked unpropitious for its success ; there was a near prospect of war, and no reason to look for any but the most limited assistance from the banks. In spite however, of this untoward outlook, stock, redeemable after fitteen years, was issued, bearing eight per cent. interest, which was the market-rate at the time. It was all readily disposed of at par. Additional stock on the same terms was issued to the amount of $1,481,700. This latter was for the current service of the year 1800, and its sale realized an average premium of 5.6 per cent. Besides these two loans, certificates of indebtedness (known in the treasury records as “ navy six per cent, stock ”) were issued for $711,700, in payment of a number of war vessels furnished to the government in the year 1798. To secure the interest upon these new debts a further increase of the tariff duties was resorted to.

The restoration of peace to Europe, coupled with the settlement of our own difficulties with France, relieved the government of further financial embarrassment. A speedy reduction was made in public expenditures, especially in those connected with the military and naval establishments. The expenditure for the current service, including in the term all payments excepting those for the public debt, was reduced from $9,972,248, in the year 1800, to $4,958,228, in the year 1802; while, owing to the same causes, the receipts from customs rose from $9,080,932, in 1800, to $12,438,235, in 1802. This last-named sum exceeded by $1,200,000 the aggregate up to that time that had been collected in any one year from the customs and internal revenue both together.

Congress profited by this prosperous condition of the finances of the country to redeem the pledge given at the different times of contracting the public debt. By the terms of this pledge, every deficiency which might occur as to the provisions for paving the interest and principal, Congress had bound itself to supply. How very inadequate the sinking fund act of 1795 had proved needed no further demonstration than recent events. Its operation had been from the first limited to the debts existing on the 3d of March, 1759; and this restrictive feature in its scheme necessarily excluded from its provisions all subsequent debts. The Dutch debt also was placed in an equally improvident, condition; for by their refusal to modify their contracts, or to make new loans, the foreign creditors had thereby defeated the sole provision made in behalf of their debts by the sinking fund act. As a consequence, a permanent and effectual enactment covering the whole of the public debt did not at this time exist. Nevertheless, the annual interest had been properly met, as also such portions of the principal as were absolutely demandable. And yet the mode under which these payments were made was irregular and unauthorized.

These irregularities, and others of greater moment, were the direct result of not ingrafting upon the original plan of the sinking fund such supplementary legislation as the public exigencies demanded. The auxiliary revenues, for instance, which had been especially created for the interest and principal of the new public debt, had never been pledged on the faith of the United States, as was the case with the other revenues; nor were they vested in the commissioners of the sinking fund, under whose direction the law required that all payments on account of the principal should be made. Even this positive injunction came to be continually disregarded, by reason of large payments having at times to be made out of moneys independent of the sinking fund, and charged to the year in which they occurred. Furthermore, no imperative clause directing their payment accompanied the recent appropriations for the debt; and since these appropriations were not bottomed on any specified source of revenue applicable solely to the debt, they could claim no priority over appropriations for the civil, military, and naval expenses of the government. In common with these latter, they too simply rested upon any moneys in the treasury. It is clear, then, that these recent provisions were not in the nature of a contract with the creditors; and besides, like other ordinary enactments, they were liable to repeal at the pleasure of Congress, without involving any breach of faith. Nor was any security afforded by the appropriation of the surpluses of the revenue, even though vested in the commissioners, since nothing else was needed to defeat this provision than to make appropriations for other objects than the public debt.

The Dutch debt fared like the others, notwithstanding the duties of the year 1797 were expressly appropriated in payment of it. What these duties amounted to was not easily ascertainable; for, under the existing mode of ascertaining them, it was not practicable to separate, in the annual total, these particular ad valorem duties from the other proceeds of similar duties. Taking, however, a liberal estimate, the former were set down at $500,000. This sum, when added to the revenue from the sale of the public lands, which was to be applied to the same object, produced no more than $900,000. But it was now that the heaviest installments of the Dutch debt were beginning to fall due: they varied for the year 1802, and for the five years thence ensuing, from $920,000 to $2,220,000; averaging for each of these six years nearly $1,600,000. The actual provision for these installments was therefore not only uncertain, but inadequate. As for the duties of the year 1800, any appropriation of them to the newly-made debts was rendered nugatory by the fact of those duties having been made applicable to the payment of interest on any part of the public debt. The duties of 1797 were limited in their appropriation to the Dutch debt and to the debts of the Bank of the United States, the appropriation to cease on their extinction.

To remove this conflict and confusion in the provisions relating to the public debt, the government enacted a new law on the 29th of April, 1802, which was designed to remedy the defects and supply the omissions of the sinking fund act of 1795. The fiscal resources of the country were now subjected to a clear and definite survey, and a like scrutiny was applied in ascertaining the actual nature and extent of the national obligations.

Just previous to this reorganization of the sinking fund, the prosperous condition of the revenue had justified a repeal of all internal duties. These duties were peculiarly obnoxious, and had all along been regarded as hostile to the genius of a free people. Their tendency to multiply offices and to increase the patronage of the executive was another cause of objection to them. Besides, the established policy of the government was to abstain, whenever practicable, from exercising the right of taxation on subjects over which the individual States possessed a concurrent right.

The revenues which continued in force were the duties on tonnage and imported merchandise; the proceeds of the sale of public lands; the duties on postage; and the incidentals arising from fines, fees, and penalties, from repayments into the treasury, and from sales of public property other than lands. These several sources were estimated to yield yearly $9,950,000. There were, besides, resources of a temporary character of over $4,000,000; these consisting of the balance due on the direct tax, of outstanding internal duties, of the sums derived from the sale of public vessels, of the shares of the Bank of the United States, and of the disposable balance of specie in the treasury.

Taking as a basis the estimate of appropriations, the annual permanent expenditures, leaving out those relating to the public debt, were found to require the sum of $2,650,000. Deducting these expenditures from the annual revenue left a remainder of $7,300,000. Now, to make all the payments actually due, during the years 1802, 1803, and 1804, on the interest and principal of the foreign and domestic debt would demand a sum equal to the above surplus. And no less a sum could be furthermore absorbed were the government to provide for all the payments for the eight years ending in April, 1810, which, according to its reserved right, it was at liberty to make. But the prospective employment of so great a fund as $7,300,000 was in some measure, dependent upon the price at which purchases of the outstanding stocks could be effected. Considering, however, that the ability of the country to bear taxation was now increasing with its rapid growth in wealth and population, thus making the burden lighter year by year, the provision deemed necessary for the first three arduous years was accordingly extended to the term of the full redemption of the public debt.

Against every ordinary contingency to arise out of a possible fall in the current revenues below the estimates on which the appropriation for the public debt was based, the treasury was effectually provided. Certain eventual demands against the United States, arising under treaties with foreign powers, and amounting to several millions of dollars, were made a contingent charge upon the sinking fund. But, circumstances permitting it, these demands, together with the temporary bank loans, were payable as well out of any other moneys at the command of the treasury. The four million dollars of temporary resources were by this arrangement set free, to be drawn upon, if necessary in aid of the current revenues. As an additional precaution, authority was conferred on the commissioners of the sinking fund to extend, by means of re-loans, the terms of payment of the Dutch debt, so as to equalize over the eight ensuing years the payments which fell principally on the first five years. This expedient, if made effectual, would go to reduce the payment in Holland from about two millions a year to one million. A million of dollars would in this way become disengaged, and might he employed in payment of the bank loans, or of any other part of the debt held and payable here in America.

The sum of $7,300,000 was thus annually and permanently appropriated to the sinking fund, and vested in its commissioners, who were directed to apply it, whether by payment or purchase, to the further and final redemption of the public debt. Not only the reimbursement of the principal was placed under their superintendence, but also the payment on account of the interest and contingent charges. And it was made the duty of the secretary of the treasury to pay over this sum to the commissioners, in such amounts and at such times as a faithful and punctual compliance with the engagements of the United States might demand.

The sinking fund act of 1802 was a marked improvement upon that of 1795, in that it simplified a hitherto very complicated system of finance, thus making it fully adequate to its specific object. Not a single appropriation, not a payment belonging to the old fund, was either deranged or altered by its action. The reform was accomplished by kneading together into one consolidated mass the scattered and special funds already established, and then by adding to this total sum, out of the duties on tonnage and imported merchandise, sufficient to make up the designated amount of $7,300,000. The actual appropriation added to the permanent and vested revenues of the old fund was about $1,800,000.

By the act of November 10, 1803, six per cent, stock to the amount of $11,250,000 was created, and made redeemable after the year 1817. This was in pursuance of a convention with France for payment in part of the purchase of Louisiana. Upon this new burden being thrown upon the sinking fund, its resources became augmented to the extent of $700,000 annually.

At first, there was no little misgiving as to the prudence of devoting so large a sum as $7,300,000 to the use of the public debt. But this misgiving was speedily dissipated when it was considered that as for several years now the revenues were in excess of the estimates, the payments made upon the public debt were accordingly far beyond the amount of the appropriation. The rapid extinction of the debt ensuing thereupon hastened the arrival of the time when the application of the full amount of the fund would have to depend upon purchases.

In anticipation of this state of affairs, the laws relating to the purchase of the public debt were revised in the year 1806. All the previous acts had authorized purchases at the market-price, if this did not exceed the nominal value of the stocks. This authority, however, from the nature of the debt, proved to be nugatory. The three per cent. stocks, for example, were selling below their nominal value, but still at. a comparatively higher and less profitable rate than the eight per cent, stocks, which were held above their nominal value. Now, however, the maximum price which the commissioners might in future give for the different species of stocks was absolutely fixed by law. For six per cent, stocks no more was to be paid than the nominal value of their unredeemed amount. In fixing the rate for the eight per cent. stocks, they were regarded as consisting of an annuity of six per cent. worth its par value, and of an annuity of two per cent, a year, which latter was to cease on the stock becoming redeemable. A premium was accordingly offered for them, equal to one half of one per cent. for every quarter remaining unexpired from the time of purchase to the 1st of January, 1809; this being the date when the eight per cent. stocks were payable at their nominal value, at the pleasure of the government. The purchase price of the three per cent. stocks was fixed at sixty-five per cent. of their nominal value. Every other limitation upon the powers of the commissioners, whether as to the time or the manner of making purchases, was set aside, thus leaving them free to judge and act for the best interests of the public.

With a view to testing the efficiency of these new provisions, a proposal was shortly made for the purchase of the debt. The experiment did not prove successful. Of the old six per cent, and deferred stocks only $17,517.61 were purchased; all other offers, amounting altogether to $91,956, were made at rates above the market-price of the stocks. In the course of the years 1806 and 1807, somewhat over one million dollars’ worth of eight per cent, stocks was bought; but the bulk of it was held back, notwithstanding the premium offered, until called in for redemption at maturity. The hope of hastening the reduction of the public debt by purchase was therefore soon abandoned, since the direct tendency of this policy was to raise the price of the stocks. It thus became necessary to find employment for more than three millions of dollars of the appropriation to the sinking fund, which, in each successive year would otherwise remain unexpended.

The plan adopted was set forth in the act of February 11, 1807, by which it was enacted to change the terms of the six per cent., of the deferred, and of the three per cent, stocks. A proposition was submitted to the holders of the six per cent, and deferred stocks to exchange the unredeemed amount thereof into a common six per cent, stock, redeemable at the pleasure of the government upon public notice being given six months previous. It was stipulated, however, that the total amount of every new certificate should be reimbursed in a single payment. In thus having an investment not subject to partial payments on account, as was the case with the old stocks, there was an advantage in the view of the government. A more favorable offer was made for the conversion of the three per cent. stock, as its value was regulated to some extent by the obligation of the government ultimately to redeem it at par. By this fact there was likewise conferred upon it somewhat of the character of a perpetual annuity, the principal of which was never to be redeemed. For these reasons, the three pet cents had always been worth more, relatively to the interest received, than a six per cent. stock, the former never selling for less than sixty per cent, of their nominal value, when the latter was at par. Accordingly, the three per cent. stock, at the rate of sixty-five per cent. of its nominal value, was made convertible into a six per cent. stock, not redeemable until after the whole of the eight per cent. and four and a half per cent. stocks, as well as all the stock which might be created in exchange for the old six per cent. and deferred stocks, should have been reimbursed. Under the supposition that the plan of exchanging old stock for new was generally to be adopted by the public creditors, there was thus offered to the holders of the three per cent. stock at least eight years’ immunity from redemption. The realizing during these years of a double rate of interest was, in the opinion of the government, considered equal to a redemption of more than seventy-two dollars, a price far above the highest this stock had ever reached.

To the foreign creditors — and these held over eleven millions of the three per cent. stock, and about fourteen millions of the unredeemed amount of the six per cent. and deferred stocks — was given the option of receiving their interest either in London, at the stipulated exchange of four shillings and ten pence sterling on the dollar, or at Amsterdam, at the rate of two guilders and a half current money of Holland for every dollar. Interest was not due abroad, however, until six months after the date it became payable in the United States; and it was also subject to a deduction of one half of one per cent., as commission to the bankers paying it. But the stocks bearing foreign-paid interest were convertible at any time into others, with the interest payable in the United States.

Subscriptions were received, both at home and in Europe, from July 1, 1807, to March 17, 1809. Within this period, $9,376,439.62 (nominal value) in six per cent. and deferred stocks were surrendered, for which were given $6,294,051.12 in new stock denominated " exchanged stock;” and $1,859,850.70 in new stock known as “ converted stock ” were issued in lieu of $2,861,309.15, subscribed in the three per cent. stock. Of the exchanged stock $168,464.90 were taken in Europe, and of the converted stock $464,494.74.

Although the conversion of the old debt could show but this limited success, it enabled the commissioners of the sinking fund to do that which otherwise they could not have done, namely, to apply, from the year 1807 to the year 1812, the entire appropriation of eight million dollars to the redemption of the public debt. Before the year 1811 the whole issue of the exchanged stock was reimbursed, and during that year and the early part of 1812 the converted stock was redeemed. Meanwhile, all the other parts of the debt, both foreign and domestic, which the government was at liberty to discharge according to the contracts had been paid off.

We must here recur to the old revolutionary debt, which, liquidated and funded as it was under various acts of Congress, amounted to $76,781,953.14. In this total is found included the funded interest, which had been suffered to accumulate from the date of the organization of the new government to January, 1791. As, however, this new government, not to speak of its want of a system of finance, had to begin its career without revenue or funds of any kind to meet the demands of even the ordinary civil list, it would seem impossible for it to have made an earlier attempt to pay regularly the annual interest.

Although the natural result of this delay in paying the interest in question was to increase the public debt, still there are several considerations which suggest an offset to this increase. The large arrears of interest, which find accumulated at the rate of six per cent. upon the old revolutionary debt, were of right demandable by the creditors in cash. By the terms, however, of the new contract with them, that interest was now converted into a capital stock, bearing an interest of only three per cent.; and therefore the difference between the nominal value of that stock and an actual settlement in cash represented the gain to the government. Also, on the principal of the debt there was a reduotion of interest from six per cent. to a rate equivalent to four per cent., according to the basis upon which the debt was readjusted. And again, owing to the fact that the interest on the debt did not begin to accrue until the year 1791, a large surplus of revenue was enabled to he collected up to that date, which, under a judicious law of Congress, was applied to the redemption of the principal of the debt, by means of purchases on the part of the government. As the public stocks were then selling below their nominal value, a saving of nearly fifty-four per cent. was effected upon a capital of $957,770.65 invested. Furthermore, in so far as the purchased stocks consisted of six per cents and three per cents, they yielded an immediate. annual interest of $38,000, and a prospective interest upon the deferred stock of the same amount; all of which every year as it accrued was used in additional purchases.

Of the original revolutionary debt, $33,825,188.86 remained unpaid on January 1, 1812. The whole of it might readily have been paid but for the internal disorders, as well as foreign entanglements of a warlike aspect, and but for the government’s consequent inability to apply to its reimbursement all revenues over its ordinary expenditures. From this combination of untoward occurrences, a large increase of the original debt had become a necessity. And yet there were sums, if they could have been applied to the extinguishment of the old debt, whose total would have thereby reduced it to quite small and manageable proportions. There was, for instance, the item of new stock created to the extent of $18,525,400, and none of it going to reimburse the old debt. Again, under the provisions of a convention with Great Britain of January 8, 1802, in relation to revolutionary debts known as “ British debts,” large payments, not appearing in the statement of the public debt, had been made out of the current revenues; these payments amounted to $6,356,053.47, together with certain claims of American citizens upon the French government, which, in conformity with the Louisiana convention of 1803, the United States undertook to pay in addition to the direct payment to France for the territory itself. These items wore adequate to reducing the old debt by January 1, 1812, to $8,944,735.41.

There must, besides, be taken into account the assets of the government on the 1st of January, 1812, in cash or its equivalent, which were applicable to the face of the debt. These assets amounted to $13,500,000, and consisted of the cash balance in the treasury, of outstanding unpaid revenue bonds, and of sums due on public lands sold to private individuals. The government was furthermore possessed of other property, which might be considered as additional items in the general account of debt, such as light-houses, fortifications, military and naval arsenals, with their stores and supplies, and more than one hundred and eighty-five sail of ships and armed vessels. The balances, also, which were rightfully due to the government from the debtor States should not he overlooked in this connection.

Notwithstanding the great enlargement of the public debt in the period from 1789 to 1812, the whole amount of it on January 1st of the last-mentioned year had been reduced to $45,120,304.53, or less by $31,661,648.61 than it was at the outset of the new government. The principal part of this reduction was effected after the year 1802; nor from that date was there any increase of taxation for the purpose. In fact, the prosperous condition of the permanent revenues permitted, in the year 1807, the repeal of the duty on imported salt.

The temporary revenues, however, were augmented in the year 1804. The piratical operations carried on by the Barbary States brought our government, in that year, into hostile conflict with that power for their suppression, and a considerable fleet was dispatched to the Mediterranean. To defray the expenses of this expedition, an advance of two and a half per cent. was placed upon all existing ad valorem duties on imported goods; and an extra ten per cent. was chargeable against foreign bottoms. These special duties were known as “Mediterranean duties,” and they were not to be removed until the ratification of a peace with the regent of Tripoli. In the year 1806 (when they were to expire by limitation), Congress voted two millions of dollars to enable the president to open negotiations for the purchase of territory belonging to Spain lying east of the Mississippi River. In order to meet this large appropriation, the Mediterranean duties were to continue in force for two years longer; and even before the expiration of this term it was found necessary to add to it, on account of threatened difficulties between Great Britain, France, and the United States, growing out of the position and claims of neutral commerce. The extension to the United States of the British orders in council, and of the Berlin decree of the Emperor Napoleon, compelled Congress, on the 22d of December, 1807, to pass an act laying an embargo upon all vessels of those two powers in the ports of the United States. This act was succeeded by another of March 1, 1809, interdicting commercial intercourse on the part of the United States equally with Great Britain, France, and their respective dependencies.

The warlike preparations necessarily accompanying these measures largely increased the expenses of the government, while the suspension of commerce following on the embargo and the nonimportation and general non-intercourse acts caused a great falling off in the revenues. For the year 1808 they were not materially impaired, and for the reason that, from the long credits given, the receipts of that year arose from the revenues belonging to the year preceding. But for the year 1809, the actual receipts of the treasury fell short of the current expenditures alone by upwards of $2,507,000. To make up this deficit, and to provide as well for payments on account of the principal of the debt, recourse was had to the surplus revenue of other years, which had accumulated as a balance in the treasury. In the years 1810 and 1811, the receipts of the government, owing to a reduction of expenses in the naval department especially, once more rose above the expenditures.

At the close of the year 1811, the country found itself on the eve of its second war with Great Britain. This unfortunate but unavoidable event not only put a stop to the further rapid extinguishment of the public debt, but added to it enormously. The great reduction, however, which had up to this time been effected proved a seasonable and important advantage to the government in the coming struggle. Excepting the annual reimbursement of the six per cent. and deferred stocks, no further payments were due on the principal of the debt till the year 1818. Every portion of the debt which was redeemable before that year had already been paid off. The sum required for paying the interest and the reimbursement amounted to $3,792,382; any surplus over this amount was by the sinking fund act of 1802 left applicable to the current expenses of the government. Of the eight million dollars’ appropriation, more than $4,200,000 had been liberated; and this amount constituted, therefore, a positive increase of revenue at the disposal of the national defense. The importance of this fact can be fully appreciated only in the light of subsequent financial difficulties, which of themselves sorely tested the energies and strained the resources of the country during the war of 1812.

John Watts Kearny.