government. If the government were to discriminate between the original holders of the debt and other holders, he made it clear that a degree of discredit would be cast on all the obligations of the United States, no matter in whose hands they were found, which would tend to defeat the end and aim of all his measures,—the restoration of public credit. Upon this point he said:—

"The nature of the contract, in its origin, is, that the public will pay the sum expressed in the security, to the first holder or his assignee. The intent in making the security assignable is, that the proprietor may be able to make use of his property, by selling it for as much as it may be worth in the market, and that the buyer may be safe in the purchase.

"Every buyer, therefore, stands exactly in the place of the seller, has the same right with him to the identical sum expressed in the security, and having acquired that right, by fair purchase, and in conformity to the original agreement and intention of the government, his claim cannot be disputed without manifest injustice.

"The impolicy of a discrimination results from two considerations: one, that it proceeds upon a principle destructive of that quality of the public debt, or the stock of the nation, which is essential to its capacity for answering the purposes of money, that is, the security of transfer; the other, that, as well on this account as because it includes a breach of faith, it renders property in the funds less valuable, consequently induces lenders to demand a higher premium for what they lend, and produces every other inconvenience of a bad state of public credit."

One of the most serious obstacles which confronted Hamilton in carrying out his financial policy was the opposition to the assumption by the new federal government of the debts of the several states incurred in the prosecution of the war. The states which had been remiss in paying their quota for the general expenses and those which had not been called upon to pay much for local defense did not see why a burden should be imposed upon them, even in equitable proportion with the other states, for the purpose of relieving those states which had been prompt with their payments or had been compelled to spend freely for the protection of their own boundaries and people. This prejudice Hamilton faced with the same clear vision and resolute purpose as that against providing for the debt of the Union. He set forth at the outset that if these debts were to be paid at all, whether by the states or by the Union, "it will follow that no greater revenues will be required, whether that provision be made wholly by the United States, or partly by the states separately." He pointed out that the control of the entire matter by the federal government would secure uniformity of treatment for the public creditors, would prevent competition between the Union and the states for the sources of the revenue, which otherwise might cause collision and confusion, and would secure a distribution of taxation more just to industry in all the states. The assumption of the state debts, moreover, he insisted was vital to the credit of the Union. Upon this head, and upon the equity of charging to the Union of the states the debts which had been incurred for the benefit of all, Hamilton observed:—

"Should the state creditors stand upon a less eligible footing than the others, it is unnatural to expect they would see with pleasure a provision for them. The influence which their dissatisfaction might have could not but operate injuriously, both for the creditors and the credit of the United States. Hence it is even the interest of the creditors of the Union, that those of the individual states should be comprehended in a general provision. Any attempt to secure to the former either exclusive or peculiar advantages would materially hazard their interests. Neither would it be just that one class of the public creditors should be more favored than the other. The objects for which both descriptions of the debt were contracted are in the main the same. Indeed, a great part of the particular debts of the states has arisen from assumptions by them on account of the Union. And it is most equitable, that there should be the same measure of retribution for all.

"The general principle of it seems to be equitable, for it appears difficult to conceive a good reason why the expenses for the particular defense of a part, in a common war, should not be a common charge, as well as those incurred professedly for the general defense. The defense of each part is that of the whole, and unless all the expenditures are brought into a common mass, the tendency must be to add to the calamities suffered by being the most exposed to the ravages of war, an increase of burthens."

Hamilton found the public debt of the Union to be $54,124,464.56. This would not be a formidable debt to-day, even with full allowance for the difference in population, but it was formidable for that time because of the comparative poverty of the country, and the scanty resources for paying it. The great increase in the productive power of man in our time, by means of machinery, improved means of communication, and other devices for saving labor and increasing its efficiency, makes it easy for prosperous nations to bear taxation without feeling the burden which would have paralyzed industry and arrested national progress a century ago. The United States in 1790 were not far beyond the primitive condition in which the entire sum of production is required for the necessaries of existence, and little is left for the luxuries of life and of state enterprise.

The total of the debt, as computed by Hamilton, was made up by adding the foreign debt, $10,070,307, with arrears of interest amounting to $1,640,071.62, to the principal of the domestic debt, $27,383,917.74, with arrears of interest amounting to $13,030,168.20, and estimating the unliquidated debt at $2,000,000. The amount of the state debts he was not able to ascertain with precision, but estimated at about $25,000,000. This made the total debt to be dealt with something more than $75,000,000. The annual interest required at the rates provided in the contract would amount to $542,599.66 on the foreign debt, and $4,044,845.15 on the domestic debt, including that of the states, making a total of $4,587,444.81. While urging the most conscientious fulfillment of obligations, Hamilton admitted that this demand would require the extension of taxation to a degree and to objects which the true interests of the public creditors themselves forbade. "It is therefore to be hoped," he said, "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."

This arrangement he did not propose to reach by repudiating any portion of the debt. He proposed to reduce the rate of interest, in course of time, in accordance with the decline in the rate for the rental of capital abroad, but to those holders of the debt who desired settlement in full at the old rates of interest, he made liberal offers. A number of optional plans for accepting funds at different rates of interest for different terms were presented, which it is not necessary to set forth in detail. The statement of the first two will give an idea of their general character:—

"First, That, for every hundred dollars subscribed, payable in the debt, (as well interest as principal,) the subscriber be entitled, at his option,