HJ247 Vv 1^ ^^ LIBRARY / ANNEX ---s -PIS /•■ v?«*^ k!t.i' "'V^l?-- '■fT- '^': Sislii ■,<> -v Cornell University LlbrSTT" HJ 247.B93 The finances of the United States from 1 3 1924 014 007 516 BULLETIN OF THE UNIVERSITY OF WISCONSIN i ECONOMICS, Political Science, and History Series, Vol. 1 ,,No. 2. pp. 1 17— 273. ^.1_ : . . THE FINANCES OF THE UNITED STATES FROM 17^ TO 1789, WITH ESPECIAL REFER- ENCE TO THE BUDGET CHAELBS J.BUIiLOCK, A. B. Fellow in Hconomica PUBUSHEi) BY authority OF LAW AND WITH THH; APPROVAL OF THE REGENTS OF THE UNIVERSITY MADISON, WIS. PUBLISHED BY THE UNIVERSITY June, 1895 PBICE 7B OEHTS 00,000 ; while shortly afterward a lottery was established.^ Early^ in 1777 the States were urged to levy taxes for the support of the general government; but, as was to be expected, no attention was paid to such a general recommendation as this. These efforts failing to bring in the amount of money that was absolutely necessary, other emis- sions of bills of credit were ordered.* These issues made the total volume of paper emitted during 1777 amount to 13,000,000; and, by the end of the year, the notes had depreci- ated until they were worth only one-third of their face value. During 1777 some aid was received fromi the subsidies fur- nished by France,^ and a small amount of money was secured through the first French loan." From this last source a larger amount was realized during the following year. In Novem- ber,' 1777, Congress made the first regular requisition, on the States; and asked that |5,000,000 be raised by taxes during the ensuing year. But all these resources yielded only a small part of the funds required for 1778, and further emissions of paper were necessary during that year.^ Congress understood very well the effect of these issues, but the failure of its at- tempts to^secure other sources of revenue made such a course unavoidable. During 1778 fourteen emissions' amounting to 163,500,000 were authorized, the amount of the issues naturally increasing as. the value of the money declined. The transac- tions of the treasury during this time were almost exclusively carried ou in the paper currency. From the appendix to the 1 October 3. ^ November 1 . 3 January 14. * Dates of emissions, February 26, May 20, August 15, November 7, December 3. i^Seep. 166. " See p. 146. ^ November 22. 8 Of. Eamsay, 11.-309, 310, 3 Dates, January 8, 23: February 16; March 5; April 4, 11, 18; May 22; June 20, 30; Sep- tember 5, 26; November 4; December 14. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 127 Journal of Congress for that year, we learn tlmt the expendi- tures were as follows: CurrenoT 62,154,842.63 Specie 78,666.60 Livres^ 28,525.00 On this point Mr. Breck well! says,^ "So' small an expendi- ture in metallic currency shows the powerful agency of paper in the belligerent operations at that critical period; perform- ing, as it did, in spite of counterfeits and depreciation, the of- fice of hard money." This depreciatiooi of the bills of credit had taken place in spite of the most strenuous efforts to keep the money circu- lating at par. At first the people had received the currency willingly,^ and during the last months of 1776 the deprecia- tion was only very slight and gradual. The campaigns of 1776 and 1777 were not seriously affected by the decline in the value of the money.* The first advances in prices,^ which began early in 1776, were probably due to the state of the market for goods included in the non-importation agreement, or, perhaps, in some cases, to the action of selfishJ or unpatriotic individu- als. But, as the issues increased beyond the requirements of trade, an inevitable increase of prices began. This was looked upon by many as "immoral and unpatriotic, and deserving swift punishment."" After seeking to punish by fine and im- prisonment persons who should advance the price of commodi- ties, the different States commenced to hold "price conven- tions," and to attempt to fix the prices of labor and of com- modities.'' The first of these conventions was held at Provi- dence in December, 1776. Congress recommended this plan to the other States, which, for the next five years, continued to attempt to control prices by law. 1 The livre was worth a httle more than eighteen cents. 2 Part II. 61. = See Ramsay, II. 314. ■> Ramsay, II. 309. sSee Sumner, Financier and Finances, 1.48 etseq.; Bolles, I. 117-120; Phillips, II. 219-226. •SeeBoUes, 1.158-159. ' See Sumner, I. 53 et seq.; Bolles, 1. 158-167. 128 BULLETIN OF THE UNIVERSITY OF WISCONSIN. But such, attempts proved futile enough. Only a few pa- triotic people regarded these laws, while others refused to part with their commodities except at their own prices. As Eam- say says, "These laws ini the first instance made an artificial scarcity, and, had they not been repe^aled, would soon have made a real one; for men never exert themselves' unless they have the fruit of tteir exertions secured to them, and at their own disposal." Further measures were adopted by Ckmgress to check the depreciation. In December,^ 1776, Washington was empow- ered to seize whatever supplies should be required for his army; to compel the owners to sell them at a reasonable price; and to punish those who should refuse to receive Continenlal money in payment for the supplies seized. A month later, further action was taken. As early as 1775 the different States had, on the recommendation of Congress, begun to pass laws making the Continental money legal tender in payment of debts. But there was no uniformity in these laws; and in January,^ 1777, Congress was led to recommend the legis- latures of the Staites to make the bills of credit full legal ten- der in discharge of all debts, and a refusal to accept the cur- rency an extinguishment of any debt. These legal tender laws enabled the Continental' notes to work the extreme degree of hardship and injury that it is pos- sible for such a depreciated currency to produce. "VSTien the laws were first adopted little injury was done, as the paper circulated, for a time, on a par with specie. But, as the de- preciation increased, incalculable harm was caused both to Industry and to public morals.^ At the opening of 1780 the evils had reached a climax. The paper money was almost worthless, all specie had long since been withdrawn from cir- culation, there was no longer any effective medium of ex- change, and the people of the States were driven to barter.* 1 December 37. 'January 14. " Ramsay has left us perhaps the most graphic account of the demoralization thus pro- duced. See Ramsay, n. 316-818. See also Sumner, Financier, I. 80-81. 4 See Bolles, 1. 133, for evidence on this point. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. liJ'J In islavdx' of this year Congress finally advised the States to amend the legal tender laws, and this advice was soon followed. The repeal of these laws ended the worst of the abuses that had arisen from the emission of the Oontinental currency, hut it was a long time before the injury that was done to public morals was entirely effaced. But these were not the only difficulties with which Congress had to contend in its experiments with the bills of credit. Counterfeiting was largely carried on,^ especially by the Eng- lish,^ who sought in this way to injure the cause of the Ameri- cans. Besides this, large amounts of paper money had been issued by the States, and thus the point of inflation was the more quickly reached. In 1777* Congress urged the States to ceaise to issue bills, and to withdraw those already issued; and this recommendation seems to have been very generally followed." The entire amount of these issues has been placed at 1209,000,000, an estimate which Mr. Knox" considers too high.^ Bnt whatever the effect of these State issues, it will be noticed that the withdrawal of these notes was commenced before the emission of the flood of Continental bills that were sent out in 1778 and 1779. At the opening of the year 1779, in spite of the rapid depre- ciation of the paper money, the States had taken no effectual measures to redeem the notes already in circulation. At that time one dollar in paper was worth only twelve cents, and Congress repeatedly urged that the States should make pro- vision for drawing in their quotas of the bills.^ By this time Congress had begun to make regular requisitions for money; but the response of the States was sO' tardy and so inadequate, that it was necessary to emit still more of the paper. The 1 Marcli 20. 2 Sumner, Financier, I. 68-69. 3 Phillips, II, ro-ri. * February 15, November 23. 5 See Bolles, I. 148; Hildretb, U. S., III. 446. ' Knox, United States Notes, 10. 'Of. JefiEerson's Works, IX. 260; Sohuckers, Finances and Paper Money of the Revolu- tionary War, 127. ' See Journal of Congress, January 2. January 13, 1779. 130 BULLETIN OP THE UNIVERSITy OP WISCONSIN. first four months of the year^ saw the issue of |65,000,000 more of the currency. This depreciated the bills beyond hope of recovery, and by July they were worth only five cents on the dollar. But all other resources were yielding only a small part of the funds needed to carry on the war, and still other issues were to follow. By September |35,000,000 more had been issued; and the evil had become so great that Congress was led to the decision that an absolute limit to the emissions ought to be fixed, and that, in any case, the amount of bills in circulation should not exceed |200,000,000. On September 13 an address was sent out to the States, showing that $159,940,000 of the notes was then in circulation ;= and stating that up to that date taxes had brought into the treasury only 13,027,000; while f 36,761,000 had been received from domestic loans, and |4,000,000 from foreign. By December the amount of emissions for the year had been raised to $140,052,000, and the limit of $200,000,000 had been reached.^ At this time one dollar of the currency was worth less than three cents, and soon after the value so declined that one dollar in specie exchanged for eighty dollars of the paper money. Thus Congress had exhausted the sources from which it had hitherto derived the greater portion of its funds for de- fraying the expenses of the war. The amount of notes authorized each year had been as fol- lows :* 1775 $6,000,000 1776 19,000,000 1777 13,000,000 1778 63,500,000 1779 140,000,000 $241,500,000 1 Dates of issue, January U; Februarys, 12: April ?. ' From time to time notes had been withdrawn from circulation ; see p. 81. Also it is possible that all the bills previously authorized had not been issued. The whole amount of emissions voted up to this time was $200,000,000, and it is only on some such basis as this that the statement of Congress can be explained. s Dates of issue, May 8, June 4, July 17, September 17, October 14, November 17, No- vember 20. « Cf. state Papers, Finance, V. 764 . BULLOCK — FINANCES OF THE UNITED STATES 1775-89. 131 Many of these had been withdraMn and exchanged, so that probably not more than |200,000,000 was in circul'ation at any one time. But this was not the whole burden which the people of tlie States had to bear in the form of a depreciated currency. As we have seen, paper money was issued by the individual States. In addition to this, many of the loan office certificates were, contrary to the expectation of Congress, placed in cirou- lation.i It is safe to estimate that, at some periods during the war, there was in circulation at least $300,000,000 of paper money. It will be apparent how excessive this amount was, when we remember that, at the time, there were not more than three million people in the States; while trade and commerce on any large scale can hardly be said to have ex- isted. The specie value of this enormous amount of paper can not be determined with accuracy. Hildreth estimated it at 170,000,000,= a figure which all writers have held to be too large. Mr. Bronson has placed it at $53,000,000,= taking the Phila- delphia rate of depreciation as a basis of computation. This amount seems to be too large, and Mr. Bronson presents none of his data. Jefferson assigned to the currency a specie value of $36,367,000.* Bayley= accepted this as "approximate to the truth;" while Prof. Sumner" says that it has no value. The general opinion has been that all these statements over- value the paper money. In the following paragraphs an at- tempt is made to estimate in a conservative manner the value of the Continental currency, and to avoid the danger of placing it at too high a figure. Errors of this sort have impaired, the results of all attempts to compute the cost of the Revolution. Since the government's expenditures in paper money were very unequally distributed ia. the various parts of the country, 1 Bolles, I. aeo, 261. ' History of the United States, III. 446. s Historical Sketch of Connecticut Currency, 150. 4 Worlrs, IX. 259. = History of the National Loans, 325. « Financier and Finances of the Eevolution, I. 98. 132 BULLETIN OF THE UNIVERSITY OF WISCONSIN. and tlie circulation of tlie currency was comparatively slow, ttere was no general uniformity in the depreciation. The fol- lowing table has been constructed from the rates of depreci- ation adopted by law in the various States.^ The States are grouped according to the extent of the depreciation in each. JlassachusettSi, Connecticut, and New York form the first group; Pennsylvania, Delaware, New Jersey, Maryland, and Virginia form the second; while the Carolinas constitute the third. In each group the lowest and highest rates of depre- ciation in any State are given. For purposes of comparison, there has been placed in a fourth column the scale of deprecia- tion adopted by Congress,^ which did not show the real extent of the depreciation. In the fifth column are to be found some rates taken from the books of a Philadelphia merchant.^ In the sixth are shown the figures used' by Jefferson in his esti- mate ;■* and in the last column are 'given the highest rates of depreciation found in any of the States. These highest rates are used in forming this estimate of the value of the money, since the object is to avoid an over-statement. Such tables of depreciation might easily conceal part of the truth, and not allow for the full extent of the depreciation ; while they would not be likely to overestimate it. By selecting the highest rates in any of the States the chance of error at this point is reduced to a minimum. Mr. Bronson's method of taking the Philadel- phia rate as the basis of computation does not differ greatly from the procedure here followed, since the depreciation was naturally greatest at the seat of the federal treasury. The method here adopted has another advantage. It is possible that even the highest rate found in any of these State tables may not always give the full amount of the depreciation. But any error here may be counterbalanced by another considera- tion. The expenditures of the government were made in var- 1 These tables may be found in State Papers, Finance, V. 773 et seq. See also Phillips, n. 210. 2 June 23, 1780. See State Papers, Finance, V. 763-771. s Phillips, II. 217; Gouee, 11. * Jefferson's Works, IX. 269. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 13S ious States, and all of tliem could not kiive been affected equally by the depreciation. In such, cases tbere will occur in titiis estimate an error of undervaluation, and this fact will render it improbable that tbe computatiou will result in an over-statement of the value of the money. Jan., 1TT7. April July October . . Jan., 1778. April July October . . Jan., 1779. April July October . . November December SI 051 1 la 1 Co 1 09- S3 76 Jan., 1760.... March Mass., Conn. and New York. PeDn.,N J. Del., Md., and Va. N. Carolina and S.Carolina. SI 20-$l 50 2 60- 3 10 SI 08- SI 60 2 25- 3 00 3 00 3 SI 46-S3 26 $4 00 2 03- 4 00 3 0.3— 4 25 4 00— 5 00 5 0O-S6 00 4 00— 5 00 5 00 Sr 42— S7 96 11 04—11 66 14 77—15 48 20 30—31 51 23 08—34 33 35 93—27 41 S39 34-$31 16 37 36—40 00 1 39— 8 00 1 86— 2 50 S2 21-S3 50 3 17— 4 00 3 54— 4 00 4 06— 4 76 S8 00 S6 00-S7 61 16 00-S1700 9 66—10 00 19 00—21 00 38 00^-30 00 14 67—16 00 20 40—26 00 36 00—38 50 25 96—37 00 40 00—41 50'-30 00-33 33 §40 00-S43 00 S33 00-S37 76 60 00-61 50 40 00—46 59 Scale adopted by Cong- Philadel- phia mer- chant. 91 pr. ct. SI 25 2 00 3 00 3 00 68 pr. ct. S4 00 49 pr. ct. 6 00 33 pr. ct. 4 00 31 pr. ct. 13 pr. ct. 9 pr. ct. 6 pr. ct. 4 pr. ct. 4 pr. ct. 3.7 pr. ct. 3.3 pr. ct 3.6 pr. ct. Jeffer- son. 5 00 S7 00-19 00 13 00—22 00 18 00-20 00 30 00 32 00—45 00 38 00-45 00 S40 00-145 00 60 00-65 00 S4 00 6 00 4 SO $8 00 17 00 20 00 30 00 38 50 High- est rate. SI 50 3 10 3 00 3 00 S4 00 6 00 5 00 5 00 $8 00 17 00 20 00 80 00 38 50 41 00 42 00 61 50 It will be noticed tliat these tables recognize no deprecia- tion before January, 1777. But it had begun by the middle of 1776; perhaps, even a little earlier. Prof. Sumner says' tiiat the room for the circulation of Continental money was exceed- 1 This means that SlOO in specie was worth SI. 05 in currency. In the fourth column is given the percentage which the value of currency bore to the value of specie. Of the states in this first group, Massachusetts was the only one that recognized the depreciation until October, 1777. ■'- For this month the same rates of depreciation are given in all the States in this group 3 Financier, I. 47-48. 134 BULLETIN OP THE UNIVERSITY OF WISCONSIN. ingly small, and that depreciation must liaTe begun almost immediately. But he gives no clear case Of an advance of prices due tO' depreciation before about the middle of 1776. On the other band, the statements^ of Gerry, Franklin, Paine, Jeffenson, and Eamsay are all toi the effect that the earlier is- sues circulated at par ; and in this view later writers have gen- erally concurred. The amount of the depreciation recognized in January, 1777, shows that the decline in the value of the money must have begun several months before that date, since all writers agree that the depreciation was at first gradual. Probably it is safest to place the beginning of the general rise of prices at about the middle of 1776, and this is the method followed in this estimate. In estimating the specie value of the Continental issues use has been made of the table of emissions prepared by Joseph Nourse in 1828.^ By comparison witb. the Journals of Congress this table will be found to be entirely correct, with the pos- sible exception of one issue amounting to f 500,000. This is- sue was ordered by Congress November 2, 1776, but it is possible that the notes were never placed in circulation.* For this reason Mr. Xourse has excluded it.* Applying to this table of emissions the highest rate of depreciation found in any of the States, a, safe estimate may be obtained. Allowance has been' made for the necessary delay in the issue of the notes by assigning to each emission the highest rate of depreciation found in any of the States two months after the resolve of Congress authorizing the issue.'^ The estimate is as follows: 1 Bee references on p. 125. Also Garry's statement in Annals of Congress, U. p 1176 First Congress. ' " State Papers, Finance. V. 764. ^See Phillips, II. 57; Sumner, Financier, I 98 ^Various other statements have been made regarding the amount of the Continental issues. Some have placed the amount as high as S357,000,000, but such estimates include Ftancter"l.''L " "'" *''' treasury after 1780. See Gou.e, 10; Elhot, 11; Sumner, = This method will not lead to an over-estimate of the value of the notes. But in any ca.e, up to January, 1779, the depreciation was quite gradual, as the table shows. There fore, up to the time when the value of the money had become very small, one might select any penod of from one to three months without materially ailecting the result BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 135 Date of Issue. 1775. ino. Februai'y May July and August November and December, 17 February . . May August November . December . 1778. January February... March April May June July September, November December. . Amount. Depreciation. Specie Value. 88,000,000 4,000,000 5,000,000 S, 000, 000 5,000,000 5,000,000 5,000,000 1,000,000 1,000,000 1,000,000 8, 000, r 00 2,000,000 2,000,000 6,500,000 5, 000, 000 5,000,000 5, OOC, 000 15,000,000 10,000,000 10,000,000 At par. At par. 1,25 1.25 1-60 3.10 3.00 3,00 4.00 5.00 5.00 6.00 5.00 5 00 6 00 5 00 5 00 6.00 8 00 10.00 Total Specie Value. 86,000,000 4, 000, 000 4,000,000 4,000,000 3. 330, 000 1,600,000 1,660,000 330. 000 250, 000 200, 000 000,000 330, 000 400, 000 1,300,000 1,000,000 1,000,000 1,000,000 2,600,000 1,250,000 1,000.000 $6,000,000 4,040,000 10,380,000 1779. February Api'il , May ( January and May ( Say that new issues were. . June July September October November 10, 000, OPO 5.000,000 10,000,000 50,000,0001 40,000,000 10,000,000 15,000,000 15,000,000 5,000,000 20, 050, 000 17,00 20,00 20,00 580, 000 250,000 600, 000 g341,500,000 20,00 24.00 24.00 38.00 41.00 50.00 2, 000, 000 410,000 620, 000 390, 000 180, 000 400,000 5,270,000 S41, 020,000 1 A part of this issue was for the purpose of exchanging earlier emissions of May 20, 1777, and April 11, 1778. See Journal of Congress, May 7, 1779, These two issues amounted to ilO, 000,000, and accordingly we have placed the new issue at S40,000, 000. 136 BULLETIN or THE UNIVERSITY OF WISCONSIN. The foregoing table allows for $10,000,000 of exchanges of new bills for old. The amount of other withdrawals can not be ascertained with any certainty. la the address of Septem- ber is, 1779, Congress stated that |159,948,000 of the bills was then emitted and in circulation. Is^ow the total amount of the issues authorized previous to that date was |201,500,000 ; and, if this statement of Congress is to be trusted, it would seem that 141,500,000 of the earlier issues had been withdrawn or never placed in circulation. The Journal of Congress enables us to account for only $10,000,000 of withdrawals. If we fpl- low the statement of September, 1779, we must deduct $31,500,000 more from the total of the emissions. These with- drawal s, or failures to issue the full amount of notes authorized, could not have occurred before 1779 because the statistics of the advances made at the treasury from 1775 to the end of 1778 show that all of the $101,000,000 of notes authorized dur- ing that time must have been in, use.'- If we assign to the $31,500,000 withdrawn or never issued the depreciation of ten to one which prevailed at the time that the first issues of 1779 were authorized, we shall have to subtract $3,150,000 from the estimate of the specie value of the bills of credit actually is- sued. Thus the estimate of the total income from the Conti- nental paper money will be $37,870,000, if we accept as cor- rect the -statement) of Congress regarding the amount of bills in circulation in September, 1779. This is a question which we have no means of determining, but it would seem to be safe to place the specie value of the money issued at not less than $37,800,000; while, if the statement of Congress is re- jected, the estimate would be $41,000,000. In other parts of this work it is thought best to use the smaller estimate, which, it would seem, does not overstate the income derived by Con- gress from this source. At the opening of 1780, when a dollar of the paper money was worth less than two cents, Congress was obliged to admit the fact of depreciation. Up to this time, that body had re- peatedly pledged the public fai th to redeem in full every dol- 1 See EUiot, 10 and 11, for Hamilton's statement ot the advances at the treasui^^! BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 137 lar of the paper; but in March.^ a resolution was passed which, provided for the redemption of the bills of credit at one-for- tieth of their face value. In order to draw in the old bills a tax of $15,000,000 a month for thirteen months, payable in the old emissions, was levied upon the States. In payment of this tax, silver and gold were made receivable at a ratio of one dollar in specie to forty in currency. As soon as paid in, the old money was to be destroyed, and replaced by bills of a new emission. These new bUls were to be issued in an amount not exceeding one-twentieth of the face value of the old issues. Six-tenths of these new emissions were to go to the States, and the rest were to be at the disposal of the United States. The new bills were to be redeemable in, specie within five years, to bear interest at five per cent, and to be receivaMe for taxes at the same rate as specie. Obviously tMs was an act of practical repudiation. The bills were first declared to be worth only one-fortieth of their nominal value; and then were made receivable only in pay- ment of an extraordinary tax, imposed for the sole purpose of withdrawing them from circulation. It may be true that this action was inevitable, and that Congress had good reason to despair of its ability ever to redeem the notes at their face value. It certainly is a fact that it was beyond any human power to repair the losses suffered by those persons through whose hands the money had at first passed; and that the at- tempt to redeem the notes in full would have resulted rather in benefiting speculators than in compensating the original losers. But these extenuating circumstances do not alter the fact of repudiation. The real purposes of the resolution were, to reduce the volume of currency to a reasonable amount, to provide the States with money wMch should enable them to meet the requisitions of Congress, and to supply the general government with additional funds. These ends were not fully realized from the measure on account of the partial non-com- pliance of the States with the requirements) of the resolution ordering the tax. The bills of the "new tenor" soon depreci- 1 March 18, 1780. 138 BULLETIN OP THE UNIVEESITY OF WISCONSIN ated, but they continued to circulate until after 1790, when they were received in subscription to the stocks created in order to fund the national debt. From the report of May 11, 1790, it appears^ that about |4,000,000 of these new bUls was actually issued. Of these the government received 11,592,000 as its proportion, of four-tenths.^ After this time the old notes disappeared from circulation and specie quickly re-appeared.'' Under the requisition of March, 1780, $119,400,000 of the notes was finally paid in and destroyed. In 1791 it was estimated that $78,000,000 was still outstanding. Under the funding act of August 4, 1790, $6,000,000 of this amount was funded at the rate of one cent on the dollar.* The rest seems to have remained in the hands of people who held it after the time fixed by the funding act, hoping that ultimately the notes would be redeemed in full. Such is the history of the paper money of the Revolution. The loss inflicted upon the people of the United States by its depreciation can never be fully estimated. Of course the de- preciation amounted to nothing less than a tax upon those who were unable to protect themselves from such a loss; and, mani- festly, this was a tax of the most unjust and objectionable sort.'' But whatever the loss, and whatever the injustice caused in this way, the fact remains that the issue of the pa- per money made possible the successful termination of the struggle undertaken against Great Britain. By this means Congress was enabled to carry on the war from 1775 to 1780, a period during which all other sources of revenue would have furnished only a small part of the needed resources." "How else could the war have been carried on?" Those writers who condemn in toto the issue of bills of credit, 1 state Papers, Finance, I. 54, 2 On the character and effects o£ this act of March, 1780, see Eamsay, II, 312; BoUes, I., 135. ' See Sumner, I. 98-100. « Elliot, Funding System, 12. 6 See Sumner's Hamilton, 151. " Further light is thrown on this subject in the discussion of loans and ta2:ation in the following chapters. BULLOCKm — NANCES OF THE UNITED STATES, 1775-89. 139 tare generally fallen into the error of blaming Congress for not doing something that lay wholly beyond its powers. Thus Mr. Bronson, in asserting that taxation should have been in- stituted from the start, and that independence was won, not by paper money, but rather in spite of it, says, "A firmer will, with a greater readiness to make sacrifices, would have opened a way."' But the "greater readiness to make sacrifices" did not exist, and Mr. Bronson's criticism falls to the ground. Had "a firmer will" been shown, had Congress attempted to levy taxes in 1775, the way would have been effectually closed, and not opened. Such a course Avould have occasioned a popular outcry that would have destroyed the authority of Congress, and rendered impossible the continuance of the war.^ But the experience of the country with the Continental bills of credit was sufflciently bitter to serve as an effectual lesson of the evils attending an irredeemable paper currency. It is true that, after the close of the war, the paper money mania again broke out in certain States; but, by 1787, we find in the Federal Convention an almost unanimouis opposition to the proposition to allow either the general government or the States to issue bills of credit.^ An overwhelming vote prohibited the States from issuing paper money.^ In the first draft of the Constitution the na- tional legislature was given the right "to emit bills on the credit of the United States."* But the Convention, by a vote of nine States to two, decided to strike out this clause, after a ■ debate that showed conclusively that it was intended to pro- hibit absolutely the federal government from issuing such bills.' All the evidence shows that the members thought that this purpose was accomplished. This was never questioned during the lifetime of the men ' Compare the considerations advanced on pp. 118, 123, 152. 2 Curtis, History of the Constitution, n. 328, 330, 364; Bancroft, History of the United states, VI. 175-176, 303-305, Plea for the Constitution, Part HI.; Fiske, Critical Period, 273-276. 'Elliot, Journal of the Convention, 2'0; Gilpin, Madison Papers, 1442, 1443. 4 Elliot, 226: Gilpin, 1238. ' See Elliot, 245; Gilpin, 1343-1346; Bancroft, Plea for the Constitution, 44 et seq. 140 BTTLLETIN OP THE UNIVERSITY OF WISCONSIN. ■vrh.0 witnessed the adoption of tke Constitution. For seventy- flve years "no suggestion of tlie existence of such, a power to make paper a legal tender can be found in the legislative his- tory of the country."^ In the dark hours of a civil war legal tender paper was again issued by Congress; and, twenty years later, the Supreme Court completed the undoing of the work of the Federal Convention by declaring such issues constitu- tional even in time of peace.^ The wonders of modern con- stitutional interpretation enabled the Court, twice altering its earlier decisions on this subject, to reject contemporary testi- mony, to brush aside a weight of legal authority undisputed for nearly a century, and to hold that the framers of the Con- stitution either did not give expression to their real intentions, or failed to embody them in effective constitutional provi- sions.' iSee speech by Roscoe Conkling, Coiie;ressional Globe, Second Session of XXXVn- Congress, 634, 1861-1868. 2 JuUiard v. Greenman, 110 U. 8. E. 4S1, For the earlier decisions see Hepburn v. Gris- wold, 8 Wall. 603; Knox v. Lee, 18 Wall. 457. 9 For this change in constitutional interpretation compare Cooley, Principles of Con- stitutional Law, first edition, 80, with the second edition, 88-83. The most noteworthy attack on the decision of the Court is that by Bancroft in his Plea for the Constitution. The legal tender decisions have been defended by Miller, Lectures on the Constitution of the United States, 135-144. 684-531; McMurtrie, Observations on Mr. Bancroft's Plea; James, The Legal Tender Decisions. This last work contains, ou p. 80, references to dis- cussions in law journals. BULLOCK— FINANCES OF THE UNITED STATES, 1775-89. 141 CHAPTER II. REVENUES OF THE GOVERNMENT (Continued). (B) Domestic and Foreign Loam. BIBLIOGRAPHY. American State Papers, Finance, I. ; Bancroft, History of th United States, IV. and V. ; Belles, Financial History of the United States, I. and II. ; Bayley, History of the National Loans; Cir- court, Histoire de l' Action Commune de la France et de l'A?}ier- igue, see "Conclusions Historiques;- Doniol, Histoire de la Participation de la France a V EtaUissement des Etuts Unis d'Amer- ique; Elliot, The Funding System; Gallatin, Sketch of the Fi- nances, Writings, III. 121-127; Hale, FranJdin in France; Hil- dreth, History of the United States, III. and IV. ; Journals of Congress, 1775-1788; Pitkin, History of the United States, I. and II. ; Ross, Sinking Fiends; Schouler, History of the United States, I. ; Sparks, Diplomatic Correspondence of the American Revolution; Statutes at Large, I. ; Sumner, Financier and Fi- nances of the American Revolution. Section I. — Domestic Loans and Indebtedness. In 1775, when tke second emission of paper money was pro- posed, Franklin urged Congress to borrow the necessary funds,^ ratlieri than resort to another issue of bills of credit. This suggestion, however, was not followed. As a temporary body, it would not have been easy for Congress to secure a loan; and it was not until after independence had been de- 1 See FrankliQ's Works, VIII. Sid. 142 BULLETIN OP THE UNIVERSITY OF WISCONSIN clared, that tWs expedient was resorted to.^ Even then the measure encountered considerable opposition; but by October the danger of depreciation of the paper money had become so great that Congress voted^ to borrow five millionl Conti- nental dollars at four per cent, interest. A loan oflflce was opened in each State; and a commissioner, appointed by the State, was placed in charge of each office and authorized to re- ceive subscriptions. But the rate of interest was placed too low, and this first attempt to secure a loan met with but lit- tle success. In January and February,'' 1777, Congress decided to bor- row -115,000,000 more through the loan offices. Shortly after- ward,* the rate of interest was raised to six per cent, and the receipts from the offices began to increase. During this year the first foreign loan was secured in France. This led Congress to resolve^ that the interest that should in the future arise on loan office certificates issued in pursuance of former resolutions, should be paid annually in bills of ex- change drawn on the American commissioners in Paris. It was hoped that, by using the French loan to insure the pay- ment of interest on the domestic debt, $20,000,000 might be borrowed at home, and further emissions of paper made un- necessary. This measure did lead to an increased willingness to lend to the government," but the issue of bills of credit was not avoided. The month of November' saw the loan office system ex- tended in the States, in the hope of thereby facilitating the progress of the loans. In the following years other expedients were resorted to in order to increase the amount of money secured through the offices. At different times^ Congress at- tempted to secure further domestic loans, but its efforts were ' See BoUes, I. 43-49. 5 October 3, 1770. 3 January 14 and February 22. •• February 3G. ° September 9. ^ See State Papers, Finance, I. 57; Elliot, 53. ' November 22. eSee Journal of Congress, February 3, 1779; September 5, 1780; June 11, 1779. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 143 only partially successful. Tlie total amount of money secured through, the loan offices was as follows:^ Periods. Amount of Currency. Specie Value. October, 1T76, to September, 1777 September, 1777, to March, 1778 .■ . March, 1778, to the close o£ the loan ofllces. Total 83,787,000 3,469,000 59,830,000 $3,787,000 2, .538, 000 5,146,000 S07,077,112 Borrowed in new emissions, in 1781, something more than Total 811,473,803 113,704 811,585,506 The specie value of the bills of credit paid to the govern- ment under these loans was fixed by a resolution of Congress of April 18 and June 28, 1780. The holders of the loan oflftce certificates were to be paid the specie value of the certificates at the time of their issue, the rate of depreciation being de- termined by the table which has been already given.^ As we have seen, this table does not show the full amount of the depreciation; and consequently the holders of the loan certifi- cates lost nothing by the 'action of Congress in repudiating the paper money. Since the table of the amounts of money loaned the government has been based upon the scale of depreciation established by the act of 1780, it is evident that the specie value of the total loans has been placed at too high a figure. But it is, of course, impossible to correct the estimate, which must, therefore, be taken as given by Hamilton. Besides these regular loans, the financial exigencies of the government led to the contraction of other forms of domestic debt. Congress authorized quartermasters, commissaries, and other oflScers to issue certificates of indebtedness for supplies taken for the army and for other debts contracted. As was to be expected, this loose system led to widespread confusion, and even corruption.^' Morris opposed it as "extremely waste- ful and expensive," and sought to obtain supplies by contract, iSee State Papers, Finance, I. 27; Elliot, 53. 3 See p. 133. 3 See BoUes, I. 281 et seq. Sumner, Financier, I. 272, 273. 144 BULLETIN OF THE UNIVERSITr OP WISCONSIN. a reform -n'Mch. Congress, in 1781/ allowed him to institute. In other instances forced loans had been authorized, and re- ceipts given for supplies thus seized by the army. In all these ways there had been issued by the close of the war a large number of certificates of indebtedness. Hamilton, in the statement of the cost of the war" that he made in 1790, placed the total outstanding obligations of this nature at 116,708,000. This agrees very closely with the items of this character included in his statement of the domestic debt in his report of January, 1790.^ In 1782, upon the recommendation of Eobert Morris,* Con- gress attempted to fund the domestic debt, and to provide means for its extinguishment.^ Although Congress had re- solved in 1781" to have the domestic debt reduced to its specie value, little had been done in this direction; and the work of settling the accounts of the States and of individuals went on very slowly. In December,'' 1782, Congress passed a resolution to the effect that any surplus above the sum neces- sary to pay the interest on the whole of the national debt, that should arise from the funds granted by the States for that purpose should form a sinking fund to be appropriated to the payment of the principal of the debt. This resolution, however, was of no value, as the national finances were not in a condition to make a surplus probable, or even possible. Early in the following year,^ Congress resolved that any attempt to pay the principal of past debts would obstruct the service of the government; and that all efforts should be con- fined to providing for the payment of interest. Three months later," however, after protracted consideration: of the flnan- 1 July 10. 2 Elliot, 10. 3 state Papers, Finance, I. 27. Elliot, 63. Compare the statements of debt given in Journals of Congress for April 29, 1783, and April 27, 1784. * Sparks, Diplomatic Correspondence, XII. 211. 8 See Eoss, 2S-28; BoUes, 317-319. 8 May 22. ' December 16. 9 January 30. » April 18. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 145 cial situation, an act ^vas passed which, would have gone far toward malting adequate proyision for the debt, if the States had only been willing to invest Congress with tte necessary authority. According to this plan, the national government was to have the power to levy import duties for a period of twenty-five years; while the States were to levy special taxes amounting to ??1,500,000 annually. The revenue from these sources, together with the proceeds of the sales of the public lands ceded by the States, was to be applied to the payment of the interest and principal of the debt. Through the oppo- sition of Ehode Island this measure failed, and it remained impossible for the Congress of the Confederation, to make any provision for the payment of the debt. After March 1, 1782,^ it became impossible to pay even the interest on the loan office certificates. For these arrearages of interest, indents, or cer- . tiflcates of indebtedness, were issued by the loan officers.^ These arrearages continued to accumulate until 1789; although Congress, by making the indentsi receivable for taxes, con- trived to draw in a portion, of these obligations incurred for interest. From Hamilton's report of January, 1790,= has been taken the following statement of the domestic debt, as it existed on March 3, 1789: Debt registered on March 3 14,598,462 Outstanding certificates of indebtedness 12,849,419 Loan ofQce certificates 11,219,523 Debt due foreign officers 186,427 128,353,832 Deduct money received from sale of lands and other property* 960,915 Total principal of domestic debt |27,392,917 Arrearages of interest to December 31, 1790^ 13,030,168 Total domestic debt 140,423,085 1 See resolution of September 9, 1783. 2 See Bolles, I. 288. = State Papers, Finance, I. 27-28 Elliot, 53, 55. * See p. 170. ^Hamilton gives the arrears of interest up to 1791. Gallatin computes them up to the 146 BULLETIN OF THE UNIVERSITY OF WISCONSIN. Before leaving this subject, it is necessary to refer to the transactions of the government with the Bank of North Amer- ica. Robert Morris secured valuable assistance from this institution, which supplied the treasury with considerable sums of money during 1782 and 1783.^ All of these loans ran for a short time only, and were soou repaid, so that the income received from this source was of a very temporary character. From the Report of 1790^ has been taken the fol- lowing statement of these transactions: Amounts Borrowed, Repayments. 1782 S923,308.« 8805,394.58 1783 8349,534.13 8388,981.01 1784 Balance repaid. Total 31,272,842.55 Of these sums, the Bank of North America furnished $1,249,975.59, and the so called National Bank, $22,866.96. Section II. — Foreign Loans. In the first years of the war the colonies had naturally sought aid from those European powers that were likely to en- tertain hostile feelings toward Great Britain. It was not until February 6, 1778, that a formal treaty of alliance was con- cluded with the French government; but, in both of the pre- ceding years, aid was secretly furnished by France. In 1776 the first subsidy was granted to the United States,' and the following year the first loan was obtained from the French "farmers general.'"* It was on the strength of the foreign end of 1789, and places them at §11,403,858. His statement of tbe principal of the debt differs slightly from that of Hamilton. We have followed Hamilton, since he presents hest the different paits of the principal. See Gallatin's Writings, III. 126. 1 See Sumner. II. 31-35, 183-192; Bolles, I. 100-101, 273-275, 344. = Banker's Magazine, 1860, 582, 583, 685. s See Bayley, 299-304. < Bayley, 304, 305, 468. BrLLOOK — FINANCES OF THE UNITED STATES, 177 5-89. 147 loans that Congress' voted^ to draw bills of exchange on the American commissioners in Paris for the payment of interest on the domestic debt. Up to March 1, 1782, when interest payments ceased, |1,6G3,992 had been applied in this way.^ In 1778 a new loan was secured in France; and, during the next four years, considerable sums were received from that country.-'' In 1781 a small loan was obtained from Spain; in the next year a loan was secured in Holland; while in 1783 another was adranced by France. Thus from 1777 to 1783 foreign loans yielded the following amounts, by years:* 1'^'"^' 1181,500 1^78 544,500 1779 181,500 1780 , 726,000 1781 1,866,566 1782 2,657,451 1783 1,673,000 17,830,517' Of this amount, France furnished $6,352,500; Holland, $1,304,000; and Spain, |174,017. A large part of this money was expended in France, and never passed through the treas- ury. Hamilton placed this amount at 15,000,000;^ but this estimate must include some part of the French and Spanish subsidies," as well as the loans proper. The accounts of the government^ sho^' that, from 1781 to the end of 1783, 1574,521 in specie was shipped to this country; while bills of exchange were drawn to the amount of |3,063,677. This includes, however, an overdraft of $350,000.^ As we have seen, $1,663,000 of these sums brought into the treasury went to pay the interest on the loan office certificates; and the rest was devoted to defraying the expenses of the war. ^ September 9, 1777, 2 See state Papers, Finance, I. 28. s For the history o£ these loans see Bayley, 305-311, 393-396. ■• This table is taken from Bayley, 468. » Elliot, 10. Of. Journal of Congress, September 30, 1788. « See pp. 165, 165. ' See Report of 1790, Banker's Magazine, 1850, 581-583. » See Bayley, 311-312. 148 BULLETIN OF THE UNIVERSITY OP WISCONSIN But, even after the close of the EeTolution, the gorernment was unable to meet its ordinary expenses and pay tlie interest on the public debt. Accordingly loans were repeatedly sought in Holland/ wliich country assisted Congress through the remaining years of the Confederation. Much of the money so obtained was expended for interest on earlier foreign loans,^ and for the expenses of the European representatives of the United States.^ Only a small portion of the loans seems to have been expended in this country. The accounts show that, from 1784 to September 12, 1789, the bills of exchange drawn on Holland amounted to only $333,117.37.* After 1784 the interest on the foreign debt fell into arrears, while install- ments due on the principal, to' the amount of |1,388,888,° remained unpaid, in spite of the pressing needs of the bank- rupt French treasury. In 1790 the whole burden of foreign in- debtedness contracted by the old Congress stood as follows: Amounts borrowed and received from 1777-1783. ., $7,830,517 Amounts borrowed and received from 1784 to 1788 1,896,000 Amounts borrowed and received to Octo- ber, 1789 400,000 $10,126,517 Amount redeemed 27,810 Total principal of foreign debt $10,098,707 Arrearages of interest up to January 1, 1790 1,640,071 Balance due to France for military sup- plies 24,332 Total foreign indebtedness' $11,768,110 1 See Bayley, 311-316. 2 Bayley, 313. = Bayley, 315. < See Banker's Magazine, 1860, 584-591. "State Papers, Finance, I. 26-2"; Elliot, 52. "See Bayley, 3-A 468; State Papers, Finance, L 26-27; Elliot, 51. 52. In this statement of the principal of the debt Bayley has been followed. H amilton's statement is $28,000 BULLOCK — FINANCES OV THE UNITED STATES, 1775-89. 149 Section III. — Tlie Debts of the States. A Tiew of the Eevolutionary finances, is not complete witJi- out some mention of tlie debts contracted by the individual States in their efforts to meet the financial bnirdens thrown upon them by OoogresB. So fair as these debts were incurred for this purpose, they find a legitimate place in a discussion of the national finances; the more so, since they were ultimately assumed by the United States. Eeference has been made elsewhere to tlie difficulties en- countered by the States ini establishing effective systems of taxation. For this reason they were o bliged toi incur debts in or- der to meet the obligations imposed upon them by the general government during the war. These debts were of a varied character, consisting of loans secured at home and abroad, bills of credit of the new tenor that were still unredeemed, State paper money. State notes issued to meet the expemse of equipping militia and for balances of pay due to the army, certificates of interest on titie State debts, and various otiier obligations.^ Their total amount was estimated by Hamil- ton at $25,000,000.2 The funding act of 1790, which provided for the assumption of these debts by the United States, stipu- lated that none of these obligations should be assumed that should appear to have been issued for any other purpose than the prosecution of the war; and limited the amount of the assumptions to |21,500,000.^ After tbe debts were finally adjusted on this basis, $18,271,787 was assumed by the na- tional government.* It is probable, therefore, that this last less. The arrearages of interest are given here as stated by Hamilton. Bayley places them at SI, 760, 377. This difEerence is so considerable that it seems best to follow the older statement. Gallatin saya that the arrears were about Jl, 700, 000. These diflEerences it has been impossible to explain. See Gallatin, Writings, HI. 124. iSee State Papers, Finance, 1.23-31; BoUes, II. S6; Gallatin, IH. 133. On this whole subject see Hildreth, IV. 155; Sohouler,!. 131-182; Bolles, II. 25-29. 2 State Papers, Finance, 1. 19. 3 Statutes at Large, I. Act of August 4, 1790, section 13. * See Gallatin, Sketch of Finances, Table XV., Writings, HI. 150 BULLETIN OP THE UNIVERSITY OF WISCONSIN. figure represents most closely the amoimt of State debts con- tracted for the purpose of carrying on the war. In the final settlement of the accounts, h-oweyer, certain balances, due to those States which: had paidi to th.e government mwe than tbeir skare of the expenses of the war, were added to these debts; and the total amount of assumptions was thus raised to $21,789,370. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 151 CHAPTER III. REVENUES OP THE GOVERNMENT (Continued). (C) Taxes. BIBLIOGRAPHY. American State Papers, Finance, I. ; Bancroft, History of the United States, V. 199-208; Bolles, Financial History of the United States, I. ; Curtis, History of the Constitution of tJie United States, I. 174, 180, 243; Elliot, The Funding System; Ely, Taxation in American States and Cities, Part II. chapter I; Gay, James Madison, 20 et seq., 34 et seq.; Gilpin, The Madison- Papers, 187-467; Hamilton, History of the Repuhlic of the United States, II.; Hart, Formation of the Union, 89-90, 109-112; Hil- dreth. History of the United States, III., see index for "Requisi- tions;" Hill, Tarifj"' Policy of the United States, 99 et seq.; Journals of Congress, 1775-1788; Lalor, Cyclopcedia of Politi- cal Science, Article on "American Finance" ; Lodge, Alexander Hamilton, 36^2; Morse, Life of Alexander Hamilton, I. 102- 112; Reports of 1785 and 1790; Secret Journals of Congress, II. ; Sparks, Diplomatic Correspondence of the American Rev- olution, XII. ; Sumner, Financier and Finances of the American Revolution; Sumner, Alexander Hamilton; The Federalist, No. In the discussion of th.e early issues of the bills of credit, it was pointed out that, although the Congress of 1775 was a revolutionary body, it was impracticable for it to attempt to levy taxes. The whole history of taxation in the colonies jus- tifies this conclusion. Up to the opening of the Eevolution, there had been) little occasion for an extensive system of taxation. The whole ex- 152 BULLETIN OF THE UNIVERSITY OP WISCONSIN. pense of th.e civU establishments of the colonies could hardly have exceeded $300,000 a year/ and a portion of these expenditures was met by other means than taxes.^' But, more than this, the economy of the colonies was relatiyely isolated, and comparatively few social ties existed. Beyond the enforcement of contracts and the settlement of disputes by law, individuals received few tangible benefits from the colonial governments; and were inclined to look upon the colony as an external force which entered into the life of the local units only for the purpose of collecting money. Further stUl, the payment of taxes usually called for money, of which the people in the rural districts had but little. All these cir- cumstances made it difficult even for the State governments established after 1775 to institute State taxation on a scale commensurate with the needs of the time. In view of these facts it is not strange that CJongress con- sidered it inexpedient to attempt to tax the colonies. In the instructions given to Franklin in October, 1778,^ Congress explained that in 1775 America had never been taxed heavily, or for a long period of time. Also, it was stated that, since the contest was upon the very question of taxation, the impo- sition of taxes, unless from the last necessity, would have been madness. In this position Congress would seem to have been justified. The habit of paying taxes is not easily ac- quired or quickly formed, as the history of our own and other countries has repeatedly testified. Indeed, it is not improb- able that the attempt to impose a burden of war taxation upon the colonies in 1775, might have led to the overthrow of the Congress itself. But the necessity of taxation by the States was early ap- preciated by Congress, which exercised whatever influence it possessed in this direction. The first bills of credit emitted were apportioned among the colonies, and Congress recom- mended that the provincial assemblies should provide by tax- 1 Sumner, Financier, I. 25. ! Ely, Taxation, 105-115. ' See Secret Journals of Congress, U. 118, BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 153 ation for siBking their respective quotas of the notes.^ This, of eoTirse, amounted to an indirect attempt to levy a tax. Again, in January,^ 1777, the State legislatures were urged to make provision for drawing in tlie paper money already issued, and to raise by taxation during the year and send to the Continental treasury such sums of money as they could collect. But, as tlie year wore on, and the bills of credit began to depreciate to an alarming extent, the necessity of taxation for the general government became more apparent. On Novem- ber 15, tbe Articles of Confederation were passed by Congress, and sent to the States for ratification. The Articles pro- vided^ that Congress should apportioui among the States, on the basis of the value of the land and tbe improvements thereon, taxes that should be levied by the State govern^ ments. Witii the necessity of taxation thus recognized. Con- gress proceeded to make its first formal requisition on the States,* in advance of the acceptance of the Articles of Con- federation. The States were asked to furnish $5,000,000 dur- ing the year 1778. This sum was not accurately apportioned; and it was stipulated that tbe amounts paid under the requi- sition sbould be considered as loaus, until an assessment of the value of the land and buildings in each.' of tlie States should make possible an exact adjustment of their respective quotas. Congress also urged that the State issues of paper money should be withdrawn; and that, in the future, State expenses should be met by taxation. The wisdom of these recommen- dations is manifest, and they show conclusively that Congress had a true appreciation of the needs of the situation. But, unfortunately, as the power to enforce these measures was lacking, they proved to a great degree ineffectual. From this time on the system of requisitions was continued until the end of the Confederation. On the whole, the lack 1 Journal of Congress, July 29, 1775. 2 January 14. ' See p. 119. * November 33, 1777. 154 BULLETIN OP THE XINITERSITY OP WISCONSIX. of political organization and vitality made it a signal failure, although, tie States did render the general gorernment con- siderable assistance. But they were inclined to depend upon Congress, ratter than upon their own efforts, when it came to raising funds for the conduct of the war; and this, too, while they retained in their own hands the exclusire right to levy taxes. Further than this, time was required to develop ef- fective systems of taxation where none had previously existed; and the occupation of parts of the country by the British made the collection of taxes all the more difficult. As a result, the burden of State taxation was very unequally distributed; and this fact made even the small sums that were raised appear extremely burdensome to many of the people upon whom the taxes fell. In addition to all this, sparse population and slight development of trade made the cost of collection very high. All things considered, therefore, it does not seem surprising that the Statesi failed to supply the large sums called for as the needs of Congress increased. While the States were struggliag with these difficulties, Congress was finding it impossible to secure a satisfactory ap- portionment of the requisitions. Complaints^ were made continually that the amounts assigned to individual States were unjustly apportioned, and various attempts were made to secure an accurate assessment. A resolution adopted in October, 1779,^ provided that all sums paid by the States should continue to be passed to their credit, and considered as loans to the government, until a satisfactory assessment could be made on the basis of the value of land and the im- provements thereon. With each new requisition this resolu- tion was re-enacted;^ and no adjustment of the burdens of taxation was secured until 1790, when the accounts of the States were finally settled by the acts of August 4 and 5, which provided for the funding of the national debt.* Indeed, it 1 Of. Journal of Congress, September 10, 17HS. ' October 6. Cf . also the resolution of November 22, 1777. ' E. g. Journal of Congress, August 20, 1788. *3ee Statutes at Large, I. Also Hamilton's Report of 1790, State Papers, Finance, L 15 et seq. BULLOCK— FINANCES OF THE UNITED STATES, 1775-89. 155 •would have been practically impossible to apportion taxes sat- isfactorily on the basis of tlie value of tiie land and improve- ments in each. State, as required by the Articles of (Confeder- ation. In 1783^ Congress vainly attempted to amend the Articles so as to admit of an apportionment of taxes on the basis of population, in the census of which three-fifths of the slaves should be included. It was partly in view of the ex- perience of the old Congress that the Federal Convention of 1787 rejected the old method, and provided for the apportion- ment of representatives and direct taxes on the basis of pop- ulation.^ It seems likely, also, that the sums which Congress de- manded were sometimes excessive. This fact not infrequently caused the States to despair of their ability ever to raise the full amount of the requisitions.^ At any rate, payments came in very slowly, and Congress resorted to all kinds of efforts to secure a prompter compliance with its recommenda- tions. Addresses were sent to the States urging the neces- sity of immediate payment of the taxes;* requisitions were made in stricter terms, and interest was to be charged on all deficiencies;^ special appeals were made to certain states;* the Continental treasurer was directed to draw upon the States for sums remaining unpaid;^ and, finally. Congress attempted to throw some of its obligations upon the States.* All these efforts, however, generally failed to accomplish their pur- poses. In 1780, when the issues of paper money were ex- hausted, the States were called upon* to furnish supplies of com, wheat, flour, etc.; but this system of specific supplies proved so wasteful that it was finally abandoned.^" 1 April 18. = See Hadison Papers, 864, 1038, 1039. 2 See Hamilton in Madison Papers, 283. Also Journal o£ Congress, April 5, 1784, * See resolutions of May 8, 1778, and September 13, 1779. s October 6, 1779; September 18, 1786. « January 15, 1781; May 19, 1780. ' May 22, 1781. 8 November 20, December 10, 1781. In these oases Congress requested certain States to provide for equipping soldiers for the Continental army. 'December, 1779; February 25, 1780; November 4, 1780. "> See Sumner, Financier, I. chap. 11. Also Hamilton, History of Republic, H. 94. 156 BULLETIN OP THE UNIVERSITY OP WISCONSIN. The fatal wealmess of tte Articles of Confederation, which left in the hands of the States the sole power to collect taxes, was apparent long before the Articles finally went into effect in March, 1781. In Febniary^ of that year Ck)ngress sought to obtain from the States the power to lery a five per cent, duty on imports. WMle this resolution was pending, the at- tempt was made to combine with this proposal a request for power to supervise the commercial regulations of all the States. Kejecting this idea, however, Congress decided to ask simply for the right to establish effective national revenues; and it is worthy of notice that, under the Confederation, aU other at- tempts to join commercial regulations to revenue measures met with a similar fate.^ But this recommendation of Con- gress failed of acceptance, largely through the opposition of Rhode Island. This State based its refusal on the claim that the proposed tax would bear with undue weight upon the com- mercial States, and would give to Congress powers which might become dangerous. ** By this time* Eobert Morris had been called to administer the national finances. Basing his policy on the necessity of taxation, he urged from the outset the adoption of a system of import duties and other taxes.^ Early in 1783, with the condition of the finances becoming more and more precarious, Congress renewed* its efforts to secure the authority to de- rive a revenue from customs duties. The States were asked to grant the government a five per cent, duty on imports with a few higher specific duties on certain articles of luxury. Con- gress conceded to the States the right to appoint the collectors of these revenues, which were estimated as likely to amount to $915,000 annually, and were not to continue for a longer period than twenty-five years. At the same time the States 1 February 3. = See Hill, 99. sSee Journal of Congress, December 12, 1782. On this whole subject see Hill, Early- Stages of TarifEiPolicy, 99-102; Sumner, Financier, 11. 64-68; BoUes, I. 292 et seq.; Curtis, I. 173-180. * February, 1781. 5 See Sparks, Dip. Correspondence, XII. 211; Sumner, Financier, II. 70. • April 18. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 157 were requested to furnish, the gOTernment with, $1,500,000 a year under the old system of requisitions. But this effort met with no better success than the earlier one had experienced, although such men as Morris, Hamilton, Madison, and Ells- worth devoted their energies to the attempt to persuade the States to make the necessary grant of power.^ Three years later the project was renewed,^ and the States were asked to consent to the establishment of th.e general sys- tem of revenue recommended in 1783. Again a negative an- swer was received; and, after this, the attempt was abandoned. Not until 1789 was the national government able to assess and collect the taxes necessary to its support. The history of the requisitions made by Congress is both interesting and instructive. The sources of information are in some particulars conflicting, owing to the confusion that existed in the accounts of the old government; but the most important facts can be ascertained with considerable accuracy. First among the sources come the Reports of 1785 and 1790. These do not include all the money expended in Europe,^ but they do give an account of the financial transactionis car- ried on in America. Next, there is the report made by Ham- ilton in May, 1790, on the "Money received from or paid to the States."* In thisi the old accounts are cleared up as far as possible. But, in the final settlement made by Hamilton, the States are credited with certain simis that do not appear on the earlier accounts; and, as a result, the statements of this report do not agree in some respects with the Eeport of 1785 and the Report of 1790. Finally, we have various reports made by committees appointed by Congress to' consider financial questions. These frequently conflict with each other, aa weU as with the other documents mentioned above; and 1 See Journal of Congress, April 24, for address sent to the people of the United States See Madison Papers, 187-167, for debates in Congress. See Sumner, Hill, Curtis, and Bolles, as above. 2 April 18, 1786. = E. g. The Report of 1790 makes no mention of the Dutch loan of 1787, which was used to pay interest due on previous loans in Europe. «See State Papers, Finance, I. 53-63; Elliot, 67-83. 158 BULLETIN OF THE UNIVERSITY OF WISCONSIN. present some discrepancies which, it is impossible to explain. Yet, they have a certain value for our purpose. The first four requisitions were payable in paper money, and were as follows:^ Date of Requisition. Amount in paper money. Specie value. ^ November 23, 1777 January 2, 1779 S 5,000,000 15,000,000 = 45,000,000 3o,ooo,ooa $2,159,981 May 21,1779 October 6, 177tl < I 2,042,500 852, 491 Total §95,000,000 $5,054,972 The payments on these requisitions amounted to $54,667,000 in currency, of which the specie value was |1,856,000, accord- ing to the scale of depreciation recognized by Congress at the time of payment.'* The last of these requisitions was made on October 6, 1779. By the resolutions of February 27 and March 18, 1780, this requisition was amended; and was made to serve as a means of withdrawing the bills of credit from circulation. In the final resolution of March 18, the States were asked to pay in $15,000,000 of the bills monthly until April, 1781; and all paper paid in after March 1, 1780, was to be destroyed. Of the $180,000,000 of currency thus required, $119,400,000 was paid in." For this the States were credited with, payments of $2,989,000 in specie, this amount representing one-fortieth of the face value of the bills of credit.'' 1 On all requisitions see Journals of Congress of the dates given; also Hildreth, III. article on "Requisitions" in the index. " The specie value is taken from a report by Morris, quoted by Sumner, Financier, I. 279; also in Sparks, Diplomatic Correspondence, XI. 447. =■ Congress also called for 86,000,000 a year for eighteen years, but no notice seems to have been taken of this amount. < This requisition was amended by resolution of March 18, 1780. which is next discussed. ^ See State Papers, Finance, I. 55, 59-62. Also Elliot, 70, 77-83. Of course, this sc^le of depreciation resulted in an over- valuation. ' See State Papers, Finance, I. 58, 59; Elliot, 78-76. ' See State Papers, Finance, I. 54, 58, 59; EUiot, (59, 73-76. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 159 The next requisitions were for specific supplies,^ the value of whicli can not be determined except in the case of the requisition of November, 1780. Here tlie States were re- quested to send goods. of the value of |4,350,000. In Hamil- ton's report tke States are credited with supplies to the amount of |881,000;= but it is uncertain whether we should be justified in taking this sum for the payments* made under the specific requisitions. It would seem probable that, in a statement of the amounts paid to the government by the States, there must be some credits given for the payments of specific supplies. It is certain that nothing else in Hamilton's tables can represent such supplies; and, therefore, it is pos- sible that the amount above mentioned represents the pay- ments on the specific requisitions. Further than this, it is impossible to ascertain to what extent the States complied with these demands of Congress. It is certain, however, that the system proved wasteful and expensive; and that it failed to furnish the army with supplies at the time and place where they were needed.^ As soon as the specie basis was restored Congress made its requisition payable in s-pecie, or, as an equivalent, the bills of credit of the new emission. These early specie requisitions were as follows : Date of Requisition. Amount. August 26, 1780... November 4, 1760 . March Iti, 1781 $3,000,000 1,643,988 6,000,000 310,643,988 Little, if anything, seems to have been received in payment of these requisitions.* In Morris's accounts, which begin in 1 Requisitions were ordered December 11, December 14, 1779; February 25, November 4, 1780. ^See state Papers, Finance, I. 55; Elliot, 70. ^See Sumner, I. chap. 11. * For the state of the finances during 1780-1781 see Bolles, I. 101-104; also an address sent out by Congress, in Journal for January 15, 1781. 160 BULLETIN or THE UNIVERSITT OF WISCONSIN. February, 1781, there is no record of any receipts from taxes until June, 1782; and the amounts then paid are credited to requisitions made after October 1, 1871. We have seen that in the resolution of March 18, 1780, Oongressi provided that the four-tenths of the bills of the new emission that were to be at the disposal of the United States, should be credited to the States on their quotas of the requisitions. The share of the new bills which fell to the United States amounted to |1,592,222;* and must, therefore, be credited to these first specie requisi- tions. The history of the requisitions made after this date can be de- termined with considerable accuracy.^ October 30, 1781, Congress called for |8,000,000. In September^ of the follow- ing year $1,200,000 was called for, but this sumi was after- wards made payable in indents, or the certificates issued by the loan officers for interest on the domestic debt. Under this requisition, however, no payments seem to have been made. On October 16, 1782, |2,000,000 in specie was called for. Hamilton states that $1,329,000 was paid on this requisition and on that of October, 1781,* up to the first of the year 1784. Morris's accounts, however, show that the receipts from taxes in 1782 and 1783 amounted to $1,466,066." A report of a committee of Congress" places the jmyment for the same period at $1,486,511. There is no apparent explanation for these conflicting statements; and, undoubtedly, the original accounts of Morris should be given the greater weight. In April, 1784,' Congress, recognizing that these demands had been excessive, called for a payment of only $2,003,000 in specie and $667,000 in indents; providing, at the same time, that these sums should be credited on the existing requisitions. 1 See state Papers, Finance, T. 58; Elliot, 73. 2 We have Hamilton's tables of the payments on the requisitions from October, 1781, to 1788, and the Reports of 1785 and 1790. = September 10. * See state Papers, Finance, I. 66. ' See Report of 1700, in Banker's Magazine, 582, 583. « See Journals, April S, 1784. ' April 87, 28. BTJLLOCK — FINANCES OF THE UNITED STATES, 1775-89. 161 The following year^ the balance due on the same requisitions was required, of which sum |1,000,000 was made payable in specie, and $2,000,000 in indents. In 1786^ a new requisition was made for $2,170,430 in specie and $1,606,632 in indents. The next year,^ $1,700,407 payable in indents was asked for; and, in 1788,* a. final requisition was ordered, which called for $1,686,541 in indents. According to Hamilton's report these requisitions made after 1781, stand as follows:^ Specie. Indents. Total. Amount levied from 1781 to 1789 §6,630,000 §8,733,000 $15,368,000 1,329,000 3, 300, 000 1,339,000 4,571,000 Payments made from 1784 to 1789 3,371,000 Total payments Balance unpaid in 1789 S3, 529, 194 Ji3, 101,731 83,371,154 S6, 361, 939 85,900,348 This statement made by Hamilton does not appear to agree at all closely with the Report of 1790. This last document states the receipts from taxes from February 20, 1781, to September 12, 1789, as follows: February 30, 1781, to December 31, 1781. 1782 1783 1784 1785 1786, specie indents supplies 1787, specie indents 178 , specie.. indents. 1789, specie.., indents. $ 646,036 46 820,029 83 613,773 89 376, 620 69 301,143 39 38,895 74 27,730 38 276.641 44 370,257 48 361,678 39 1,041,756 67 87,739 37 90,721 41 Total payments in specie $3,383,661 Total payments in iudents 1,541,631 Payments in form of supplies 27, 730 Total receipts from taxes « $4,953,022 8t ! Sept. 27. " August 2, 1786. s October 11, 1787. * August 2, 1788. ' State Papers, Finance, I. 56, 57; Elliot, 71, 73. 'See Banker's Magazine, 1860, 581-591. 162 BULLETIN OF THE UNIVERSITY OF WISCONSIN. But it is possible to account for these discrepancies. The greatest difference between th.e two statements is. in, the mat- ter of the payments of indents. Now tte States seem to have continued to turn indents into the national treasury after Sep- tember, 1789. In Hamilton's Report cm the Public Credit, in January, 1790,^ the amount of indents paid in up to Decem- ber 31, 1789, is placed at |2,244,231. By May, when the report was presented concerning the money paid by the States, this sum had been increased to $2,371,154. This seems to explain the accounts of the payment of indents. In the case of the specie payments there is only a difference of $117,000 between Ham- ilton's statement and the accounts of the old government. This may be explained on similar grounds.. Indeed, from what we know of the delays and backwardness' of the State officials, and even of the national receivers, in furnishing state- ments of their accounts, such an explanation seems more than plausible.^ It is probable, however, that these credits given to the States by Hamilton arose from the settlement of old accounts; and do not represent actual payments in specie after September, 1789. We are able then to construct the following table, which shows the total receipts from taxes after February, 1781. Specie. Indents. Supplies. Totals. 11,466,066 = 1,917,595 3 117,803 $1,466,066 January, 1784, to September 12, 1789 Credits given the States after Sep- tember 12,1789 $1,541,6313 829,523 $87,730 3 3,486,956 947,326 Totals $3, 501,464'' $2,371,154 $27,730 $5,900,348 1 State Papers, Finance, I. 28; Elliot, 55. 2 For an illustration see the Journal of Congress for September 30, 1788. There it is stated that the receipts of indents up to April 1, 1788, were $1, 881, 000. But of this sum only $1, 100,000 had been received into the treasury, the balance still remaining in the hands of the loan ofBce receivers. 3 See p. 161, accounts of old government. = §i230,20O 1 History of the Public Revenue, third edition, I. 471. 2 The National Budget, 36. 3 See p. 147; also Bayley, 468. « See Bayley, 326. « See Journal of Congress, April 5, 1784. « See p. 147. ' Compare this statement with Journal of Congress, April 5, 1784. 8 See p. 143. » See p. 144. '" As nearly as can be computed from Journal, April 5, 1784. 11 The estimates of interest vary from year to year as stated in the Journals. J 2 See Bankers' Magazine, 1800, 683; Report of 1790. 182 BULLETIN OF THE TJNIVEESITT OP WISCONSIN. During this period, the inability of the government to meet its expenses led to an increase of the foreign indebted- ness. Also the arrearages of interest on the domestic debt continued to accumulate, so that the year 1789 showed a great increase in the public debt. The appropriations made by Congress for the running expenses of the government from 1784 to 1788 possess con- siderable interest. In round numbers they were as follows :' For service of 1784 §457,000 For service of 1785 404,000 For service of 1786 446,000 For service of 1787 417,000 For service of 1788. 326,000 Total 82,050,000 The adjoining table presents an analysis of the objects of expenditure included in these appropriations : For the civil list^ 8631,000 For the army and navy 8882,000 For Indian expenditures 891,000 For geographer's department 822,000 For pensions 8146,000 For contingencies ^279,000 From the Report of 1790 we are able to ascertain the amount of money actually expended by the United States at the treasury from January, 1784, to September 12, 1789. The adjoining table shows these expenditures which have been classified under the four heads of repayments of an ticipations on the revenues, payments for the ordinary ser- vice of government, payments for foreign interest, and pay- ments for interest on the domestic debt. These domestic in- terest payments were made by drawing in through taxes the indents issued for arrears of interest. The repayments of an- ticipations have been separated from the other expenditures in order to avoid the error of counting these items twice. Of course the anticipations existing on January 1, 1784, must 1 See Journals of Congress for each year. 2 For use of this term, see p. il2, note 6. BULLOCK FINANCES OF THE UNITED STATES, 1775-89. 183 be included in the total expenditure.s of this period, since they formed a deduction from the revenues of 1784. Expenditures from 1784 to September 12, 1789, at the treasury. Repavments of antici- pations. Ordinary service 6t government. Interest on foreign debt. Interest on domestic debt paid in indents. Balances in treasury or deficits. 1784 S314,183 $525,339 380,613 364,596 337,734 397,364 157,986 + $18,440 + $41,903 — 59,571 — 105,815 — 174,189 — 189,906 1735 3509.874 75,000 31,993 1786 $38 895 370,237 1,033,999 90,731 :7sr 1788 69,571 105,815 174, 189 1789 (to Sept. 12.).... $2,163.685 1 $318,866 49'si, 533,873 96 A comparative table of the receipts and expenditures at the treasury during the years covered by the Report of 1790 gives the following results: Expenditures. In Specie. >jiticipations previous to 1784 $314, 183 Service of government 2, 163, 685 Interest on the foreign debt 316, 866 Total in specie $-■'94734 Error 11,614 In Indents. Interest on domestic debt $1, 553, 873 Receipts. In Specie. From taxes $1,945,323 From bills of exchange 333, 117 From miscellaneous sources 338, 000 Total in specie $2, 616, 442 Deficit on Sept. 12, 1789 189,906 $2,806,348 In IndenU, From indents $1, 541 , 163 Error in accounts of year 1788 12,000 The error of 111,000 in the account of the specie trans- actions does not effect the general accuracy of this table. 1 This includes $35,823 spent in 1737 expressly for the foreign service, also some very small sums expended for sa.aries of foreign ministers. 184 BULLETIN OF THE UNIVERSITY OE WISCONSIN. The most careful examination has failed to show where the discrepancy has crept in. It may be due to slight errors or confusion in the original accounts. In the case of the indents there is certainly an error in the accounts for 1788, as the Eeport states that $12,000 more indents were can- celled in that year than appear to have been paid into the treasury.^ All the items included in this table under the head of expenditures have been taken from the table that immediately precedes. The account of the receipts has been taken from this same Report of 1790, and the indi- vidual items have been already given in the earlier chapters of this work. The greater part of the European expenditures of the government does not appear in this statement of the treasury transactions. The only items so included are the payments for interest on the foreign debt and a few thousand dollars which are mentioned in 1784, 1786, and 1787 as expenses belonging to the European service. But we have a report presented to Congress in 1788,'' which gives among other things a statement of the re- ceipts and expenditures in Europe from January 1, 1784, to April 1, 1788. In most particulars the figures of this report agree with the report of 1790, and from it has been compiled the following statement of the financial transac- tions in Europe during this period. In one or two cases Bayley's History of the National Loans has furnished addi- tional materials. In this way an almost complete account of the foreign transactions has been secured up to April 1, 1788. Care has been taken to exclude any items of ex- penditure that may appear also in the accounts of the treasury. 1 See Banker's Magazine, 1860, 539, 590. ' = Journal of Congress, Sept. 80, 1788. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 185 European expenditures not included in table of expenditures at the treasury. Anticipations existing on Jan. 1, 1784 i. Payments for interest on foreign debts. Expenses of foreign serv- ice of tlie U. S. Miscellane- ous ex- penses. Total ex- penses in Europe. 1784 to April, i;85.... $350,000 867,869 481,516 §119,825 200, 404 S48,638 89,426 April, 1?85, to April, S:i50,000 J SS49,386 SO SiiO, S89 89 8136,064 80 81,867,680 29 BalaDce in favor of the U. S., April 1, ir88 §32,307 80 These expenditures in Europe were met by the proceeds of the foreign loans, and by a few small receipts from mis- cellaneous sources.^ It must be remembered that from these same revenues came also the $333,117 that was drawn into the national treasury by bills of exchange.^ The sums derived from foreign loans up to the end of 1788 amounted to §1,896,000,* a portion of which was received after April 1,' the date given in the Journal of Congress. The statistics already presented do not include any pay- ments of foreign interest after April, 1788. Up to that time the payments had amounted to $866,252, of which sum $3] 6, 866" had come from the national treasury, and $549,386 had been drawn from funds held in Europe.' But pay- ments were made after that date, as is shown by Hamilton's Eeport on the Public Credit. In an indirect way we may be able to ascertain the expenditures for foreign interest up to the end of 1789: 1 See Bayley, 311,312. 2 These are given in the Journal of Congress for Sept. 30, 1788. But the information con- tained in the report is not sufllcient to enable us to ascertain the amount with any ac- curacy. s See p. 148. 4 See p. 148. 5 Bay ley, 397. » P. 183. ' See last table. 186 BULLETIN OF THE UNIVERSITY OF WISCONSIN. Foreign interest accruing in 1784, 1785, 1786 1787, 1788' $2,176,553 Foreign interest accruing in 1789^ 542,599 Total interest accruing, 1784-1789.. ^2,719,152 Arrears of interest to end of 1789' $1,640,071 Arrears of interest previous to 1784*. . . 67,037 Arrears between 1784 and 1789 11,573,034 Interest accruing 1784-1789 §2,719,152 Arrears of interest, 1784-1789 1,573,034 Interest payments from 1784 to the end of 1789 iSll,146,118 We have seen that the payments up to April 1, 1788, were $866,252. Therefore, the amount expended for that purpose between that date and the close of the year 1789 would appear to be 1279,866. This could have been met from the receipts from foreign loans after April, 1788, which were as follows :° Balance of loan of 1787 $66,000 Loan of 1788 400,000 These amounts would be sufficient to meet these interest payments and leave a balance of $186,184, to which should be added the balance of $22,307 existing on April 1, 1788.' On the basis of the results already obtained there has been prepared the following table of the approximate receipts and expenditures during these closing years of the Confedera- tion. 1 Journal of Congress, August 20. 1788. ' Report on Public Credit, State Papers, Finance, I. S2. ' Report on Public Credit, State Papers, Finance, I. 20. < Journal of Congress, April 5, 1784. » See Bayley's tables of the quarterly issues and redemptions of these loans, in his History of the National Loans, 397. • See p. 185. B ULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 187 Expenditures, 1784-Sept., 1789. Domestic expenfiiturps, excluding interest on foreign debt, see p. 188 $2,477,808 Foreign expenditures, excluding interest on foreign debt, see p.185 808,293 Interest on foreign debt, see p. 186 1,146,118 Total specie expenditures $4,482,279 Unexpended balance of foreign loan, see p. 186 Indefinite Domestic interest redeemed in in- dents, see p. 1134 12,371,154 Domestic debt cancelled by sales of public land, see pp. 170, 171. . . $960, 915 Eevenues, 17e4-Sept., 1789. In Specie, From taxes, see p. 164 $1,945,825 (This excludes the $117,000 credited by Hamilton after September, 1789.) From foreign loan s, see p . 148 2, 296, 000 From miscellaneous sources, see p. 169 338,568 Total revenues in specie $4,579,893 Deficit in Sept., 1789, at the na- tional treasury, see p. 183 189, 906 From taxes payable in indents, seep. 164 $2,871,154 Obligations paid in for public lands, p. 170 $960,915 These transactions may be summarized in the following manner: The expenses of government, domestic and for- eign, had been about 83,476,067, of which amount $189,906 remained unpaid on September 12, 1789. The principal of the domestic debt had been decreased I960 ,915 by the re- ceipts from the public lands ; while the arrears of interest had increased from $3,109,000' to $11,493,858 at the end of 1789,' in spite of the fact that $2,371,000 of indents had been drawn in by taxes. The principal of the foreign debt had increased from $7,830,517^ to $10,098,707,* while the arrears of foreign interest had grown from $67,037 ^ to $1,640,071 « at the end of 1789. 1 See p. 181. ' See p. 145, note 5. s See p. 181. Aiter a while the conduct of the Board began to be much criticised, and finally great dissatisfaction arose. Congress was led to investigate the management of the treasury. In August and November, 1780, committees submitted reports on this subject.' Some internal disor- ders were discovered, and one of the committees was in- duced to recommend the removal of two members of the Board for "disgusting conduct." Certain irregularities also appeared, but there was no revelation of gross frauds. Many of the complaints seem to have been due to a lack of courtesy on the part of the Board and a disinclination to give full publicity to the transactions of the department. In May, 1781,' another committee exonerated the ofBcials from charges of this last character. But whatever may have been the truth of these attacks on the integrity of the Board, it is nevertheless true that the inefSciency and laxity of the financial management had been almosb incredible. For this, Congress, as well as the officials of the treasury, must be held responsible. A favorite method of making expenditures had been to place money in the hands of committees or of in- dividuals to be expended for definite purposes. In many cases such moneys were never accounted for. Xo satis- factory returns were rendered for §2,100,000 advanced to the Secret Committee of Congress previous to August, 1779.* Many persons, even officers in the civil de- partments, refused to render any accounts.^ There was the greatest delay and confusion in the settlement of all business. Many accounts had been settled without any authority, or without proper vouchers. Mention is made of 1 See Sumner, Financier, I 8; BoUes, I. -i-CO. ^ See Guggenheimer, 135-137. ' See Journal of Conxress, May 16, K81. ^ Journal of Congress, Sept. 30, 1~-S. '' Letter of Morris, Sparks's Diplomatic Correspondence, XII. 4-30. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 197 two of these, amounting to 1500,000 in specie, concerning' which an auditing committee appointed by Congress re- ported that it was doubtful if many of the claims there made against the United States had any solid foundation/ Letters by Morris point to similar conditions.' Of the money expended in Prance the greater portion was never accounted for. The auditing committee of 1788 places this amount at about ^4,000,000. Silas Deane, one of the three commissioners sent to Prance, conducted Bnancial matters most recklessly, and left only confused accounts. This was caused not by dishonesty on his part, but by extremely lax business methods. Deane was at- tacked by his enemies in Congress, and most unfairly treated; but the accounts left by him were never satisfac- torily adjusted.' After this, Pranklin became the financial agent of the United States in Prance. Possessing, as he did, the confidence of the French government and the ability to secure loans and subsidies, the American cause depended almost solely on him during the critical years from 1779 to 1782. His character is a sufficient guarantee of the honest conduct of affairs during that time; but it is also the only one that we have. While he had always pro- tested that he was not a business man, and not capable of keeping accounts, he nevertheless sought before he re- turned to America to obtain a settlement of his affairs. Con- gress neglected, however, to perform this simple act of justice; and no adjustment was ever secured.* In 1782 Con- gress, at the suggestion of Morris, proceeded to make provision for the settlement of the European accounts ; and finally despatched an agent to Europe on that mission.' 1 Journal of Congress, Sept. 30, 1788. 'Sparks's Diplomatic Correspondence, XII. 442. » See Bolles, 227-233; Wharton, Diplomatic Correspondence, I. chap. XIV. The report ot the committee that investigated Deane's affairs is to be found in Sparks's Diplomatic Cor- respondence, n. 162. It is partly unfair and colored by Arthur Lee's dislike of Deane. * See Morse's Franklin, 411, 412. On the whole subject, see Wharton's Diplomatic Con- respondence of the Revolution, I. chap. X; Morse's Franklin, 305-351. » Journal of Congress, May 28, 29; Nov. 18, 20, 1782. 198 BULLETIN OF THE UNIVERSITT OF WISCONSIN. But this purpose was only partly fulfilled; and these trans- actions have always remained "involved in darkness, " as was stated by the report of the committee of Congress in 1788. The facts already presented show what confusion must have attended the transactions of the treasury. Hamilton, in 1790, was obliged to place the expenditures for 1780 at the round number of 13,000,000,^ which was evidently a mere estimate. Congress had constant difSculty in secur- ing information concerning the exact condition of the treasury. At the same time public property was commonly misused and poorly cared for. Great waste arose in this way at the very time that the resources of the country were reduced to the lowest point. In the report of a committee of investigation from Valley Forge it is stated that the "prop- erty of the continent is dispersed over the whole country. "^ In both methods and objects of expenditure the public moneys were oftentimes squandered. There was found every- where the widespread corruption that so often attends the purchase of army supplies.' Moreover, the expenditures were oftentimes conducted on a most extravagant scale;* and this, too, in spite of the efforts made by Congress for retrenchment and reform. Also for a long period it was attempted to supply the army directly with specific supplies. Enormous waste was produced in this way;' but, yet, it was only with great difficulty that Morris was allowed to insti- tute the system of obtaining supplies by contract. Finally, the business of the Board of Treasury was con- ducted with a slowness which precluded the possibility of an efficient administration. An example of this has been pre- served in a letter of an acting quartermaster general of the army.' This officer writes, "I am obliged for every de- 1 Elliot, Funding System, 10. " See Sumner's Hamilton, 86. > See Kapp, Life of Kalb, 143. »See Durand, Materials for History of the Eevolution, 218, 219; Kapp's Life of Kalb, 140. •* Sumner, Financier, I. chap. XI. « See BoUes, L 283-285. ' Quoted In Bolles, I. 306-307. BULLOCK FINANCES OF THE UNITED STATES, 1775-89. 199 mand upon me to . . . . make a special application, and some times, although, not commonly, I get some kind of an answer in the course of two or three weeks after applying. The 21st of June I sent an application on the estimate of Colonel Cox ; about ten days afterward I got a war- rant for the sum ; yesterday I got a letter of advice from the board to the treasurer, and to day ' I have got near one-fifth of the money. This movement, slow as it may seem has been pushed with uncommon assiduity, and with more than common success. " In such methods lay an important cause of the financial weakness of the United States during the period of the Revolution. In 1781 Congress finally proceeded to remodel all the ex- ecutive departments, and to place a single head in charge of the business of each. This step had been postponed as long as possible, and was taken reluctantly in response to a strong popular demand for such a change.^ The old ad- ministrative boards had been as inefficient as such bodies must generally prove for executive purposes. Affairs had come to such a pass that it was manifest that the old system of divided authority could not longer continue. Early in 1779' Congress had instructed the Committee of Foreign Af- fairs to secure information concerning the executive de- partments of various foreign governments. But a delay of nearly two years ensued before the much needed changes were inaugurated. Up to this time the development of the various adminis- trative boards out of the early committees of Congress had proceeded largely according to the needs of each particular case, and without very much conscious attempt to pattern after foreign systems. It is true that the Boards of War, Treasury, and Admiralty, had derived something of their forms from analogous bodies that existed in England at that time; but it may be doubted whether more than the 1 July 13, irSO. ° See Guggenheimer, 148-155. ^ Secret Journals of Congress, IE. 130. 200 BULLETIN OF THE UNIVERSITY OF WISCONSIN. general conception of the system of board management was derived from t.his source. It also seems to be a fact that the Chambers of Accounts created in 1778 had their pro- totype in the French "Chambres des Comptes;" and that the title, if not the office, of comptroller was of French origin. But this is as far as foreign influence can be traced with any certainty. But the inquiries into foreign systems which Congress in- stituted in 1779 make the case quite different when we come to the changes effected in 1781. Early in that year,' Con- gress resolved to appoint a Secretary of Foreign Affairs, a Secretary at War, a Secretary of Marine, and a Superin- tendent of Finance ; and conferred upon these officials pow- ers sufficient to enable them to control and shape the af- fairs of their departments. This was a step distinctly in advance of formal English development. It seems prob- able that, at this point, Congress was considerably influ- enced by the example of the French administration, in which the principle of unified executive authority was de- veloped further than in England, or, perhaps, anywhere else. In the department of finance this needed reform met with more opposition than in any of the others. There were many people who thought that such a step would endanger the liberty of America. This thought was ex- pressed by one member of Congress, who in a letter^ characterized a treasury department as, "at best a very dangerous affair to the liberties of the people. " But on February 7, 1781. the office of Superintendent of Finance was created; and, a few days later, Eobert Morris was called to fill the position. The Superintendent was given all the authority necessary to the proper conduct of the department. He was required to examine into the state of the finances, and to digest and report plans for their im- provement; to execute al l acts of Congress concerning 1 January 10, February 7. ' See Simmer, Financier, n. 181. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 201 revenue and expenditure; to superintend and control the settlement of public accounts and the expenditure of public money; and to have general direction of all the branches of his department. Then, as soon as Morris had gained time to mature his plans, a reorganization of the entire establishment followed. The office of treasurer of loans "Was first discontinued,' his duties being turned over to the treasurer of the United States. On September 11 the other changes were carried into effect. The officers of the treasury were to be an assistant superintendent, a comp- troller, a register, and a treasurer, together with such auditors and clerks as should be necessary. The comp- troller was given the duties of an auditor general; the position of the treasurer was not materially changed ; and the register was to be, as he is today, the chief book- keeper of the treasury. These three officers and the auditors were to be appointed by Congress. The administration of Morris marks a new era in the financial history of this period. His business experience, supplemented by the training that he had received while chairman of the Standing Committee of Finance, had admir- ably qualified him for the position of Superintendent. More- over, his wide reputation and recognized ability enabled him to secure a large degree of independence in the execution of the powers entrusted to him. Congress finally authorized him to remove from office for just cause all officers of the treasury that were not appointed directly by Congress, and gave power to suspend all others pending an investigation of any charges preferred against them.^ This was a matter which Morris considered a necessary condition of effective administration. Thus, for a time. Congress ceased to interfere in the purely administrative work of the treasury. Mqrris appointed to the position of Assistant Financier, Gouverneur Morris, from whom he subsequently received l,Iuly 33, 1781. 2 April SI, 1781. 202 BTJLLETIN OF THE UNIVEKSITT OF WISCONSIN. important assistance.' Then, having matured comprehen- sive plans for the conduct of the national finances, the Financier, as he was commonly called, assumed the man- agement of the treasury department. The condition of the finances at this juncture was as critical as can well be imagined. The issues of paper money had long since been exhausted. With the disap- pearance of the old currency, the receipts from the loan offices gradually ceased. Taxes, with the exception of those which called for specific supplies, had yielded prac- tically nothing for many months; and a considerable time was yet to elapse before Morris would be able to secure any revenue from this source. Thus the sole dependence of the treasury was the loans and subsidies which Frank- lin was still able to secure from the French government. The policy of Morris looked to the inauguration of a com- plete plan of constructive finance. First he desired an ef- fective system of taxation, favoring federal taxes collected by the United States in the form of customs duties. Then he proposed to bring about a retrenchment in expenditure and a thorough reform in administration. Finally he sought to obtain further loans in Europe, which he re- garded as necessary in order to meet the whole burden of war expenditure, and to tide the government over the in- terval that must elapse before his new plan for establish- ing domestic revenues could be set in operation.^ When Morris finally entered upon his duties in June, 1781, his only available resources were such bills of ex- change as Congress was in the habit of drawing on the foreign envoys, without knowing whether any funds ex- isted in Europe for meeting the bills. Almost immedi- ately General Washington called upon the new Superin- tendent to find the means necessary to carry on the York- 1 See Roosevelt's Gouvemeur Morris, 103 et seq.; Sumner, Financier, I. 270: Sparlts Gouvemeur Morris, I. chapters 13 and 14. > ^■ . » In this account ot Morris's administration our chief dependence has been upon the careful investigations of Prof. Sumner. BoUes has been consulted with some advantage. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 203 town campaign. Morris was obliged to provide the army with transportation from the head of the Chesapeake, to advance a month's pay to the soldiers, and to forward spe- cific supplies to points convenient for the expedition. By means of the most strenuous exertions he -was enabled to meet these demands. Fortunately in August 1462,000 in specie arrived from Prance ; and this sum in the careful hands of Morris was productive of the most important re- sults. Thus through heroic efforts the campaign was brought to a successful termination. The total expendi- tures from February to December 31 were f723,000, more than $500,000 of which was devoted to the support of the army.' It is not possible within the necessary limits of this chapter to enter into the details of the work of Morris dur- ing the next three years. The most that can be done is to outline the general features of his administration. From the very beginning he endeavored to secure from the States a prompter compliance with the requisitions made by Congress. Constant appeals and statements of the weakness of the treasury were sent to the governors of the States. These entreaties were commonly neglected; but, in spite of all difficulties, after the middle of 1782 the receipts from the requisitions began to supply a consider- able portion of the government's revenue. Morris appreci- ated, however, the weakness of the requisition system, and urged upon Congress and the States the establishment of federal import duties. All the influence that he could com- mand was used to induce the States to grant this power to the general government. Besides urging the importance of taxation, Morris seized upon every possible expedient to increase the income of the treasury. He conducted commercial transactions on behalf of the United States, and engaged in other ventures which were hardly dignified undertakings for a Superintendent of Finance.^ 1 The Keport of 1790, Bankers' Magazine, 1860. "E. g. bill-kiting, see Sumner, Financier, I. 282-3; clipping coin, ibidem, n. 44-45. 204 BULLETIN OP THE UNIVERSITY OP WISCONSIN. While struggling to increase the national revenues, Mor- ris sought with equal care to secure economy in the matter of expenditure. During his superintendency Congress was induced, as will be shown in the following chapters, to pre- pare the budget more promptly and carefully than at any other period in its history. After appropriations were once made, Morris manifested a determination to apply public moneys solely to the purposes contemplated by Congress.' How far he adhered to this intention it is impossible to ascertain; but it is clear that he alone of all the adminis- trators of the treasury realized the evils that attend the transfer of appropriations and the diversion of public funds. In all departments of expenditure retrenchment was carried on, and numerous economies effected. Waste- ful methods were changed, useless offices abolished, and the running expenses of the government largely re- duced.^ A comparison of the estimates of expenditures for 1781 and 1782 shows how successful Morris was in his efforts in this direction.' Under the new regime the business of the treasury was conducted with a dispatch hitherto unknown. Every effort was made to secure a prompt settlement of the public ac- counts. Order was gradually introduced into the transac- tions of the department. Congress and the States were furnished with more exact information concerning the state of the finances, although publication of the quar- terly reports of the treasury was deferred until 1785. In order to assist the government in its financial operations, Morris secured the consent of Congress to the establishment of a bank.' This plan had been previously suggested by Hamilton, Gouverneur Morri s, and perhaps others. ' Early 1 See letter of Morris in The Historical Magazine, VI. IRB. ^See Sumner, Pinancier, n. 107, for description of methods of treasuiy administration under Morris. = See p. 175. * Journal of Congress, May 86, Dec. 31, 1781. » On the establishment of the bank, see Sumner, Financier, U. chap. XVU- Lodge's Ham Uton,27; Morris's Hamilton, 69-73; Roosevelt's Gouverneur Morris, 103; Belles 373-375- Lewis, Bank of North America. ' ' BULLOCK — riNANOES OF THE UNITED STATES, 1775-89. 205 in 1782 the Bank of North America, incorporated both by- Congress and the State of Pennsylvania, commenced opera- tions which were based principally upon $250,000 of public money which Morris had invested in subscription for its stock. After surmounting many difficulties, this institu- tion rendered the government most valuable assistance. At different times during his adminstration, Morris bor- rowed from the bank $1,249,000, while the United States received $22,867 in dividends up to the time that its stock was surrendered in re-paymenb of money borrowed from the institution. For these loans, interest amounting to $29,719, was paid. The extent and variety of the duties which Morris was called upon to perform baffle all description. Never, per- haps, has a minister of finance carried on operations of a more miscellaneous character. There was certainly no branch of administration in which his influence was not felt. On several occasions he employed his well estab- lished personal credit to support that of the United States. This seems to have been the case with the notes amounting to over $300,000 issued to the army at the time of its disband- ment. By reducing the expenses o£ the government he was able to reduce gradually the number of notes outstand- ing; and to retire from office in November, 1781, with the assurance that all would be paid at maturity. There are numerous stories to the effect that he devoted large amounts of his own money to the public service. Thus he is said to have advanced $1,500,000 toward the expense of the Yorktown campaign. But such statements have no basis in fact. In an account ' which Morris rendered after the capture of Cornwallis, there is a record of $12,000 which the Superintendent had advanced to the United States. Bt this is the only transaction of the sort that is evidenced by any of his accounts. A final feature of Morris's work was his attempt to clear 1 Sparks's Diplomatic Correspondence, XI. 4Si. 206 BULLETIN OF THE UNIVERSITY OF WISCONSIN. up the confusion which attended the greater part of the domestic indebtedness that had been contracted in the prosecution of the war. The loan offices early claimed his attention. Their operations had often been carelessly con- ducted, and Morris made constant efforts to secure from the loan office commissioners a settlement of their accounts. Then a large number of individuals held obligations that had been issued by military officials in payment for sup- plies purchased for the army. The liquidation of such claims was pushed forward as fast as possible, but the pro- cess of settlement was necessarily slow. Finally there had been no settlement of the accounts between the States and the general government. Some of the States claimed that they had already borne more than their fair proportion of the burdens of the war, and that it was unfair under such circumstances to expect them to make any further compli- aace with the requisitions ordered by Congress. To the adjustment of these accounts Morris devoted the greatest energy, but the difficulty of the work and the inaction of the State officials prevented the accomplishment of this de- sign. While he endeavored to ascertain the exact condition of the public indebtedness, he also urged upon Congress the importance of funding this mass of debt, and of provid- ing the means for its ultimate extinguishment. It was with this special purpose in view that he labored to have a system of federal imposts established. We have already seen how these efforts failed. At the outset Congress manifested a desire to co-operate with Morris, and even consented to extend the sphere of his authority. But the Superintendent by his vigorous administration aroused bitter opposition in many localities. The States did not desire the establishment of any financial system that would have involved greater efforts on their part; and there soon arose the same factious contentions that frustrated so many of the best efforts exerted in be- half of an efficient national government. This feeling re- BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 207 acted upon Congress, which gradually withdrew its en- couragement and active support. Personal enemies, promi- nent among whom were Arthur and William Lee, com- menced a series of contemptible attacks upon the Financier, disparaging his administration, and charging him with having derived personal profit from his old position as a member of the Committee of Commerce. At the opening of 1783 nothing had been done toward establishing the domestic revenues necessary to place the nation's finances upon a sound and honest basis. In spite of the caref al management of the treasury, large expenses had been incurred in both of the preceding years ; and the foreign indebtedness of the government had been in- creased. Perceiving that his plans for a permanent do- mestic revenue had failed, and that he no longer possessed the full support of Congress, Morris resigned his position as Superintendent.' In his letter to the President of Con- gress he said: "To increase our debts while the prospect of paying them diminishes, does not consist with my idea of integrity. I must therefore quit a situation which be- comes utterly unsupportable. " But the army had not yet been paid, and no one but Morris could find a way of doing this. At the earnest en- treaties of Congress, he consented to continue in office un- til some settlement could be effected and the army dis- banded. As we have seen, the soldiers were partially paid by issuing notes, upon which Morris put his name in order to support the credit of the government.^ After using him in this, the greatest service which the Finan- cier rendered, his enemies resumed their attacks with a meanness which is hardly credible except to one who has become familiar with the asperities that attended the polit- ical controversies of that time. In November, 1784, Morris finally retired from his position, having made provision for the redemption of all the notes issued to the army. I January 24, 1783. See Sparks's Diplomatic Correspondence, XII. 326. ' See Bancroft, VI. 82. 208 BULLETIN OP THE TTNIVERSITT OP WISCONSIN. On June 17, 1783, a committee appointed by Congress "to enquire fully into the proceedings of the office of finance," submitted a report on the subject of Morris's administration of the treasury. One member of this committee was Arthur Lee, a most cordial hater of the Superintendent; and at least one of the others bore him no good will. Yet the committee was obliged to report that "it appears that the business of that office has been conducted with ability and assiduity, in a manner highly advantageous to the United States, and in conformity with the system laid down by Congress." It was also found that "since the ap- pointment of the superintendent of finance, the public ac- counts of receipts and expenditures have been regularly and punctually kept; and that many of the accounts which preceded this institution have already been settled, and most of the others put into a train of adjustment. That all persons who have been entrusted with public money, under the present appointment have been regularly called upon for an account of its expenditure, and that their ac- counts have all been furnished, excepting only the quarter- master general," and some few others. Further, it is stated that, after comparison of Morris's accounts with those of earlier years, it appeared "that the order and economy which has been introduced since the establish- ment of this office, has been attended with great savings of public money, as well as many other beneficial conse- quences." Among other reforms the committee found "that in the department of commissary of issues no less than two hundred and fifty persons were discharged, whose pay amounted to $126,300 per annum. That in one instance a demand was made for one thousand tons of hay for the post of Philadelphia, of which ten tons only were granted. The residue being rendered unnecessary by the new ar- rangement. " In view of all the attacks which were made upon Morris, it may be well to present one other piece of testimony, BtTLLOCK — FINANCES OP THE UNITED STATES, 1775-89. 209 which comes from a member of Congress who was thor- oughly opposed to the Superintendent.' The member ex- pressed himself in the following words, "I will tell you very freely that I am clearly of the opinion that, in mere money transactions, he has saved the United States a very large sum. I am of that sentiment, because a comparison of ex- penditures shows, that, since he has been in office, the ex- penditures have not amounted annually to half so much as they did before. I am also of opinion that much more reg- ularity has been introduced in keeping the accounts than ever existed before I lay it down as a good general maxim, that, when a person is to be attacked, it is wise not to endeavor to depreciate his real merit; be- cause this puts into his hands an advantage. If he can clearly exculpate himself in part, it renders that which is really true liable -fo suspicion, and consequently less effica- cious. If you suppose that person (Morris) has rendered the public no valuable services, I acknowledge that there is a very considerable difference in our sentiments. If you suppose that he may have rendered valuable services, but that his notions of government, of finance, and of commerce, are incompatible with liberty, we shall not differ. I think, therefore, that the fort to be raised against him ought to stand on this ground, if, in urging his dismission, or rather a new arrangement of the office, it shall become necessary to be personal. But I hope it will be generally agreed, that, if it was necessary to create an omnipotent financier in 1781, that necessity does not exist now. "^ A few months' previous to this final retirement of 1 See letter ot Samuel Osgood, Feb. 3, 1784. This is contained in the Massachusetts His torical Society Proceedings, 1862, 467. » All the evidence bears out the conclusion that the charges brought against Morris's ad- ministration of the treasury were entirely groundless. The same is true of most of the other accusations relating to his conduct as agent of the State of Pennsylvania, and as a member of the early Committee of Commerce. Prof. Sumner finds on the books of the United States Treasury one account which shows a balance of 193,312 against Morris. This the Financier explained as due to a wrong method of charging depreciations. See Sumner, Financier, H. chapt. 29; Sumner, Robert Morris, chap. 6. > May 27, 28, 1784. 210 BULLETIN OF THE UNIVERSITY OF WISCONSIN. Morris, the powers which had been entrusted to the Super- intendent were again placed in commission, by the creation of a new Board of Treasury, consisting of three members. Considerable difaculty was experienced in finding suitable persons that were willing to take the position.' For sev- eral months after the retirement of Morris, the affairs of the treasury were conducted by the comptroller; and not until the middle of 1785 did the new Board of Treasury as- sume the direction of the department. The administration of this body furnishes nothing of any interest, its chief work being the adjustment of the tangled accounts of the Eevolutionary period. It had become evident that, with the failure of the attempt to establish national revenues, the government of the Confederation was wholly unable to improve the condition of the national finances. Thus the Treasury Board had no stimulus to energetic action. In much the same way as the former Boards, it continued to administer the affairs of the department until succeeded by Hamilton in September, 1789. The action of Congress in placing the department again in commission was a victory for the opponents of Morris and for the advocates of the system of board management. But there were many who recognized the real reasons for the apparent failure of the Financier, and the country did not lose the benefit of its experience under a capable min- ister of finance. In 1789 the question was fought out for the last time, and the department of finance was finally given a single head. 1 See Journal of Congress, June 3, Nov. 30, Dec. 10, 1784; Jan. So, April 1, 1785. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 211 CHAPTER II. THE BUDGET AND THE HISTORY OP BUDGETARY METHODS Section I. — Historical Introduction. The financial activity of the state centers around the re- ceipt and expenditure of public money. In order to se- cure stability, there must be a constant adjustment of one line of activity to the other; and financial equilibrium must be constantly preserved by a formal ordering of rev- enue and supply. The accomplishment of this result in- volves, first, the ascertainment of the necessary objects and amounts of public expenditure ; second, the determina- tion of the methods to be employed in raising the needed money; and third, appropriate organs for collecting and applying the supplies devoted to the public service. In modern representative governments the legislative departments have assumed final authority in the decision of questions of revenue and supply. The word budget has been used to designate the legislative enactment by which public revenues are determined and appropriations fixed for a definite period of time, usually a year.' Such a pro- cedure implies, first, a preliminary estimate of necessary expenses and probable revenues; and second, a law author- izing the necessary forms and amounts of expenditures and taxes. At least, this is the case wherever perfect unity is realized in budgetary procedure.^ Manifestly 1 For a discussion of the soientiflc meaning of the word budget, see Stourm, Le Budget, chapter I, section 1. The term was first used in England about 1760 to designate the an- nual financial statement. See Dowell, History of Taxation in England, II. 169; Bastable, Public Finance, 468; Boscher, Finanzwissensohaft, sec. 150, note 1. ^ On the subject of the budget see Bastable, Public Finance, Bt. TI., chaps. II. and III. ; Leroy Beaulieu, Science des Finances, H. 1-191; Cohn, Finanzwissensohaft, sees. 170, 171; Jellinek, "Budgatreoht" in Handworterbuch der Staatswissensohaften, II. 774; Kosoher 212 BULLETIN OP THI! UNIVERSITY OP WISCONSIN. some such preliminary estimate of income and expenses, and such an adjustment of resources to demands is an ab- solute necessity for any large public economy. Without it, adequate provision cannot be made for all the public wants; and there can be no coordination of revenue and expenditure. But, if legislative authority is to be a reality in these matters, this preliminary determination of revenue and supply must be supplemented by effective checks on the collection and issue of money, and by the right to inquire into the actual application of all public funds. Such methods of control and audit are a necessary part of any system of legislative control of the finances. Of this more will be said in another chapter. The term budget is one that has been but little used in the United States in the discussion of our national finances. This is, perhaps, due to the fact that the separate legisla- tive management of the expense and revenue sides of our federal budget has destroyed that appearance of unity which characterizes the methods of those foreign coun- tries in which the word is commonly used. Indeed, it is possible by a process of strict definition to deny that budget is a proper term to apply to the series of separate acts by which Congress each year deals with the question of federal revenue and supply. It seems desirable, however, to use the term in the dis- cussion of our national finances. In so doing we are in ac- cord with the usage of other countries; while, at the same time, we are reminded that there is after all a fundamental connection between our separated revenue and appropriation laws. Formal unity is, of course, lacking in our present budgetary methods ; but that is no reason for not employing the word budget, in a broad sense, to designate the entire Finauzwissensehaft, sees. 53,150, 151; Schantz, "Budget," in Handworterbuch, U. 758; stein, Finanzwissensohatt, I. 800 et seq.; Stourm, Le Budget; Umptenbach, Finanz- wissenschaft, 489 et seq.; Wagner, Finanzwissenscbaft, I. 219-852, also in Sobonberg's Handbucb der Politisoben Oekonomie, lU. 532 et seq. BULLOCK — FINANCES Or THE UNITED STATES, 1775-89. 213 process by which measures for our federal revenues and ap- propriations are prepared and enacted. Such is the sense in which the term will be employed. Modern budgetary methods originated in England, where, nearly a century before our Continental Congress met, an effective budget system had been finally established. It will not be necessary to treat of the early stages of this development; but it is desirable to refer to the history of the English budget after the Revolution oE 1688.' This Revolution, ending a struggle that had colored English history for several centuries, finally established parliamentary supervision and control of the finances, as of other branches of the government. Parliament insti- tuted the system of annual appropriations for the public service. These were based upon estimates presented on the responsibility of the ministers, and specified both the objects and amounts of expenditure for the ensuing year. At the same time, the supplies for the royal household, the personal expenses of the king, and for the payment of pen- sions and certain civil oflSces, were separated from the rest of the expenditure^ and brought together into the "Civil List.^" The various branches of expenditure were then assigned as charges on the permanent revenues of the gov- ernment, and additional taxes were imposed whenever re- quired to meet the expenses of any year. Thus the pub- lic revenues were devoted only to such purposes as Parlia- ment should F .'nction, while there was secured a unified regulation anU more accurate adjustment of receipts and expenditures. The development of cabinet government brought the de- tails of all financial transactions before the House of Com- 1 For the history of taxation and appropriations before this date see Wilson, the National Budget, chap. I. ; Stubbs, Constitutional History of England, II. sec. 274, III. sees. 870, 371 , 437, 43S; Bastable, Public Finance, 643-644; Gneist, History of the English Constitation, II. 4 et seq., 40 et seq., 150, 240, 293 et seq.; Hoscher, Finanzwissenschaft, sec. 53. 2 See Dowell, History of Taxation in England, II. 40^4; Macaulay, History of England, V. 355-358; May, Constitutional History of England, I. 193 et seq.; Todd, Parliamentary Government, L 349, 350; Wilson, The National Budget, chap, VI. 214 BULLETIN OF THE UNIVERSITY OF WISCONSIN. mons, which had already established its superiority to the House of Lords in the matter of money bills. In this pro- cess the financial estimates and statements of the ministry developed into what was known as the budget, and intri- cate rules of parliamentary procedure were gradually adopted. Such was the form which English budgetary methods had assumed at the end of the eighteenth cen- tnry. ' Section II. — Bevenue and Supply in the American Colonies."' In order to understand the circumstances under which the Continental Congress evolved a budget system, it is necessary to refer to the experience of the individual colonies in their efforts to develop systems of revenue and supply. It is not within the scope of this essay to under- take any exhaustive presentation of this early budgetary history. Indeed, a vast amount of investigation into the subject of colonial finance will yet be required, before such a complete treatment will be made possible. It will suffice, however, for the purpose to draw from the most important secondary and the more accessible original sources a brief account of the development of budgetary principles in the thirteen colonies. {A) The Separation of Poivers. Through the varying, yet similar, processes by which representative governments were instituted in each of the original colonies, nothing stands out with greater distinct- X For the present English budget system, see, Blaokstone, Commentaries, L Bk. I. chap- ters n. and vni.; Buxton, "Budget," m Palgrave's Dictionary of Political Economy, Gneist, EngUschesVerwaltungsrecht,!. 431; May, Parliamentary Law and Practice, chap. XXIL; Jellinek, "Budgetrecht," in Handworterbuch der Staatswissenschatteo, n. 775-7?7| Spofeord, "Budger,"in Lalor's Cyclopedia of Political Science, II. 318; Todd, Parliamentary Government, I. 689-826; A. J. Wilson, The National Budget, chap. VI. ; Woodrow Wilson Congressional Government, I37etseq. For other European countries, see Leroy Beau- lieu, n.; Stourm, Le Budget; Czoernig, Darstellung der Einrichtungen fiber Budget- ff frf o"^"'^^'"^''*'" '° S«°'i''«'''«'-bu<=h. n. 777-787; Proceedings of the Cobden Club' 1874; U. S. Consular Reports, No. 90, March, 1888; Spofford, "Budget," in Lalor's Cyclopedia. Jor ahst of the authorities referred to on this subject see the general bibliography, BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 215 ness than the persistence and success with which the colonists insisted upon the right of their legislative as- semblies to direct the finances. This side of colonial his- tory is so familiar, that we can assume the facts of the separation of powers and the establishment of legislative control of the finances. In the following pages attention will be confined chiefly to a consideration of the formal methods of legislative procedure in budgetary questions. (B) Legislative Control of .Revenue. While other forms of revenue existed,' taxes became more and more important in colonial budgets as the country developed, and as the colonial wars necessitated a heavy increase of public expenditures. This discussion, there- fore, may safely be confined to the revenues derived from taxation, direct and indirect. From the first, the colonists appreciated the fact that legislative control of taxation could be made effectual only by limiting the operation of tax laws to short periods of time. Over this subject arose some of the earliest con- flicts between the royal, or proprietary, officials and the colonial assemblies. Direct taxes were regularly limited to a short period, while the indirect were restricted, but not so sharply.^ In Massachusetts and New York, however, even the indirect taxes were continued from year to year by a constant re-enactment. Thus the governments were left without permanent sources of revenue, and legislative authority was insured. Some of the earliest attempts to control the application of revenues arose in connection with acts for levying taxes. The assemblies frequently specified the purposes 1 Ely, Taxation, 107 et seq. ; Douglas, Massachusetts, chaps. HI. and IV. ; Ripley, Vir- ginia, sees. 50, 106. 2 Colonial history offers such abundant illustration of this that we need not refer to many special works on the subject. See Lodge's American Colonies; Douglas, Financial History of Massachusetts; Ripley, Financial History of Virginia; Schwab, New York Property Tax. 216 BULLETIN OF THE UNIVERSITY OP WISCONSIN. for which the taxes were imposed. This specialization of funds was often of such a general character as to prevent the realization of the purpose in view.' But, in other cases, taxes were levied for such special purposes as the sal- ary of a governor, the construction of lighthouses, fortifica- tions, etc. In Virginia taxes were pledged for the payment of public debts, and appropriated to that end, "and to no other use or purpose whatsoever.'' ( C) Legislative Control of Appropriations. As we have seen, the earliest method of controlling the expenditure of public funds was that of specifying in the tax laws the object for which taxes were to be raised. But this amounted to nothing more than the appropriation of lump sums for the general purposes of government, and left to the legislature little actual voice in the disposal of public moneys. Accordingly, we find in the colonies, at an early period, a movement in the direction of making sup- ply bills specific in character, and of restricting their ope- ration to a short period. This is well illustrated in the history of New York. Some of the most bitter struggles of the eighteenth cen- tury in that colony centered around the efEorts of the Assembly to limit the operation of supply bills to the space of one year, and to make the appropriations specific both in objects and amounts.' In South Carolina, after 1721, the various tax laws con- tained 'long appropriation clauses appropriating every penny raised to some specific object."' To refer to the ex- perience of other colonies would be but to multiply exam- ples of the same character. These may perhaps be most 1 In Massachusetts, for example, the first taxes after the provincial charter of 1691 were laid "for the defense of his Majesty's subjects and interests." See Acts and Resolves of the Province of Massachusetts, I., session of 1693. 2 Hening, Statutes at Large, VIII. 650, March, 1773. » See North, in Magazine of American mstory, 1879, 165, et seq.; Roberts, New York, 287; Smith, Hist, of New York, 433; Bancroft, II. 400. i.Wliitney, Government of the Colony of South Carolina, 96. BULLOCIC — FINANCES OF THE UNITED STATES, 1775-89. 217 conveniently found in Massacliusetts, Pennsylvania, New Jersey, and Virginia.' The struggle for the limitation of the objects and amounts of appropriations arose oftentimes in connection with the salaries of the governors and other ofdcials. This was espe- cially true in Massachusetts, where the legislature even went so far as to reduce arbitrarily the salary of the gov- ernor, as a means of punishing that officer.' In New York we have an interesting message' by Governor Clinton on this same subject. The royal governors continually recom- mended that England should create funds for the mainten- ance of royal officials in the colonies; and the desire to do this was one of the reasons for the final attempts to tax America." But the colonies perceived clearly the issue in- volved. Having found that the control over supplies was the most effective safeguard against encroachments by the royal officials, they were ready to resist to the utmost the attempt to establish in America a civil list independent of the grants oE the colonial assemblies.* Partly from opposition to the governor, and partly from unwillingness to raise the necessary taxes, the assemblies not infrequently refused to make adequate provision for the support of government. Perhaps North Corolina fur- nishes the most notorious instances of this sort.° In Con- necticut the salaries of the governor and other leading of- ficials were dependent upon semi-annual appropriations, which is probably the shortest limit placed upon salary grants in any of the colonies.' 1 Further reference will be made to Massachusetts in the following pages. For Pennsyl- vania, see Bancroft, II. 25, 26, 27; Gordon, 315, 336, 392; Franklin's Historical Eeview of Pennsylvania, 32; Minutes of the Provincial Council, I. 457,468 et seq. For New Jersey, see Bancroft, n. 34; Crowell, 21. For Virginia, see Ripley, 95, 97, 99. For Maryland, see Schart, H., 121, etseq. " See Bancroft, II. 68, 69, 246; Felt, History of Taxation in Massachusetts. 2 Journals of the Legislative Council, 1022. 'See Bancroft, II. 246, 247, 334, 360-351, 383 etseq.; Fiske, American Revolution, chap. I. s See Bancroft, H. 330, 350; HI. 415, 416. » See Bancroft. II. 266, 841. See also the case of Pennsylvania, Bancroft, II. 571-572; III. 91. ' See Public Records of Connecticut, 1771, XIII. 602, 566. 218 BULLETIN OF THE UNIVEESITY OF WISCONSIN. Toward the close of the colonial period legislative con- trol of appropriations had become so well established, that the conditions existing in all the colonies correspond very closely with those depicted by Mr. Smith in his description of the state of government in New York.' Smith's words are as follows ; "It will be seen that the democratick branch of the colonial government had placed the governor, and almost every other officer, in a state of dependence upon its votes and measures. Not a single shilling could be withdraw n from the treasury, but by legislative consent. This was particularly galling to the lieutenant governor. It had stripped him of that executive patronage and influence, which was deemed by him so essential to the support of his administration. In truth, it was a great step towards that independence which was afterward obtained." (5) B estrictions on Transfers and Diversions of Appropriations. The strictest specification of the objects and amounts of expenditure will not, in itself, secure the application of all public funds in accordance with the will of the legisla- ture. Money may be expended for purposes not strictly contemplated in the original appropriations; while unex- pended balances are always arising so as to furnish an easy means of evading the specific provisions of appropriation laws. Such difficulties met the people of the colonies in their attempts to control expenditures, and became the subjects of special legislation. In Virginia the desire to control the application of public moneys caused the legislature, as early as 1695, to appoint a treasurer who should be accountable to the House of Bur- gesses alone. ^ This officer was thus independent of the colonial agents of the Crown; and through him the Bur- gesses were able to control the administration of the finan- ces. His duties came to be strictly prescribed, and he was required to give bonds for the fa ithful performance of his 1 Smith, New York, 445. ' ■ « See Ripley, Financial History of Virginia, 102-103, BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 219 work.' Warrants for the payment of money were to be is- sued only in accordance with the acts of the General As- sembly. New York went still further.-' The Assembly early gained control over all the officers charged with the collection and disbursement of the revenues of the colony, as did the Virginia House of Burgesses.' This was accomplished by naming the occupant of each office in the act appropriating money for salaries. But a further step was taken at an early date. The Assembly resolved that the payment of any money by the treasurer before the passage of specific acts for its appropriation should be deemed a misapplica- tion of funds, for which that officer should be held account- able.* In subsequent acts the treasurer's accountability was further emphasized, as in the general appropriation bills of 1774 and 1775,^ by which the treasurer was instructed to account to the governor, the Council, and the Assembly for all payments made under the authority of those acts. In the appropriation bill of this last year all unexpended balances remaining in the treasurer's hands were specially appropriated for the support of the government." Massachusetts, also, provided restrictions of this same character. The general appropriation acts of the province specified the objects and amounts of expenditure, and then contained a general requirement that money should be ex- pended "for no other purposes whatsoever."' But of greater interest is a provision of the appropriation of 1733.° This law required that all balances of appropriations arising un- 1 See Hening, Statutes at Large, VI. 249. ' See Magazine of American History, III. 168. s Cf. also Pennsylvania. Franklin's Historical Review, 33; Minutes of the Provincial Coun- cil, L 457. « Smith, 434. 6 Laws of N. y., 1774-1775, 61 et seq., 94 et seq. « Compare also the cases of Pennsylvania and South Carolina. See Franklin's Historical Review of Pennsylvania, 38; Minutes of the Provincial Council of Pennsylvania, I. 457; Whitney's Government of the Colony of South Carolina, 45. 46. ' Acts and Resolves, V. 108. » Acts and Resolves, U. 693. 220 BULLETIN OF THE UNIVERSITY OF WISCONSIN. der the act should lie in the treasury for the further order of the General Court. (,E) Superior Poivers of the Loioer Branch of the Legislature in Budgetary Questions. Prom an early date in colonial history the lower houses of the colonial assemblies claimed in the matter of money bills superior authority over the upper. How far this was a mere reflection of the relations existing between the two Houses of the English Parliament, it is not easy to ascer- tain. But it is certain that in many cases a difference in the constitution of the two branches of the colonial assem- blies, or a difference in the interests of the two bodies, is a sufficient explanation of the assertion of the superior pow- ers of the lower house. The upper house was more sub- ject to the influences of the proprietors or of the royal gov- ernors in many of the colonies. In Massachusetts, where both houses had a basis in election, it was found that the upper and smaller body oftentimes sided with the royal governors in disputes over financial questions. This was in many cases due to the fact that the position of the gov- ernor was sounder and wiser than that of the people's rep- resentatives ; and it was not caused invariably by sinister influences exercised on the upper house. On the whole, it seems fairer to attribute to such causes the greater, influ- ence on this differentiation of the powers of the two branches of the legislature. In Massachusetts, during the eighteenth century, disputes arose in the legislature over the right of the Council to make amendments to tax bills. An, instance of this sort arose in 1746 when the House forced the Council to yield its claim to the right of amending such measures.' Much interest attaches to a resolution adopted by the House on this occasion; "it is very surprising that the honorable Board should in their vote of this day begin a grant of a 1 See Felt, Statistics of Taxation in Massachiusetts, 324, 325. BULLOCK — FINAXCES OP THE UNITED STATES, 1775-89. 221 great expense to this Province; for how reasonable soever the particulars noted may be, yet the House apprehend such grants should always originate with the people, who are at the cost of them. " In such questions the superior powers of the lower house became finally established by the first State constitution of 1780." Here it was provided that, "All money bills shall originate in the house of represen- tatives; but the senate may propose or concur with amend- ments, as on other bills. " It was this particular clause which served as the model for the similar provision of our federal Constitution.' The New York Assembly, at an early period, asserted a claim to superior power in questions of money bills.' The controversy on this subject seems to have lasted for some time; but no restriction was placed on the power of the Senate to originate or amend money bills in the first constitution adopted in 1777. In Pennsylvania the exist- ence of a uni-cameral legislature prevented this question from making an appearance. But, in 1755, when the gov- ernor ventured to prepare a tax law, the Assembly pro- tested that the executive "neither could nor ought to pro- pose a money bill. " * During the colonial period of New Jersey's history, the principle was established that the initiative in taxation lay with the representatives of the people, and not with the proprietary body or the governor." The State constitution of 1776 prohibited the upper house of the legislature from preparing or altering any money bill.' In Maryland bitter contests had taken place between the two branches of the legislature on the subject of supply bills,' and the constitu- 1 Poore, Charters and Constitutions, I. 964. "See Gilpin, Madison Papers, 1530-1531. ^SeeMagazineof American History, in. 169; Journals ol the Legislative Council, 1705, 1754. < Gordon's Pennsylvania, 315; Franklin, Historical Review, 144, 391. 5 Crowell, Taxation in New Jersey, SI; Mulford, History of New Jersey, 351, 353. « Poore, XL 1310. ' Soharf, Hist, of Maryland, II. 12 5; McMahon, Hist, of Maryland, 297 et seq. 222 BULLETIN OF THE UNIVERSITY OP AVISCONSIN. tion of 1776 restricted the powers of the upper house in this particular.' In North Carolina the lower house of the legislature seems to have possessed, at an early date, the power of passing money bills without the necessity of concurrence by the upper." But no provision of this sort appears in the first constitution adopted by the State in 1776.'' In the legislature of South Carolina the lower house, as early as 1689, claimed the exclusive right of originating money bills, and refused to allow the upper house to amend them.* At a later date all bills""originated in the lower house." From 1771 to 1775 legislation was practically sus- pended in the colony owing to a deadlock between the lower house and the governor and Council, on account of the refusal of the lower house to expunge an obnoxious clause in a tax bill.' Accordingly we are not surprised to find the power of the upper branch of the legislature lim- ited by the provisions of the constitution of 1776.' Of the other States," New Hampshire, Delaware, and "Virginia restricted by constitutional provisions the powers of the upper house in the matter of money bills. The first constitutions of Pennsylvania and Georgia provided for a legislature having but a single branch, while Rhode Island and Connecticut lived on under their old charters for many years. Thus this principle wa-5 embodied in seven of the nine constitutions first adopted in States that had a bi-cameral legislature. In some of these States the upper house was prohibited from amending, as well as from originating money bills; while in others the exclusive privilege of the lower branch consisted simply in the right to originate such measures. iPoore, I. 817. ^ Basset. Constitutional Beginnings of North Carolina, 04. ' Poore, II. 1409. < Whitney, Government of the Colony ot South Carolina, 4S. » Ibid., 62. = Ramsay, History of South Carolina, II. 131-132, ' P(. ore, H. 1615. ■ ^ See Poore. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89 223 In the Federal Convention of 1787, after a long struggle, restrictions were placed on the right of the Senate tb originate money bills/ From the debates in that body we learn that this privilege of the lower house was the cause of serious contentions between the two branches of the legislatures of those States in which such a restriction was made.' One of the opponents of the proposition to place such a clause in the Constitution ventured the opini6n that, "These clauses in the constitutions of the States had been put in through a blind adherence to the British model. " " But these investigations have shown that such was not the case. The restrictions appear to have been in large part the result of years of conflict between the two houses of the colonial legislatures. Although two States left such a provision out of their constitutions, yet it would seem that Gerry, in a speech at the Convention, voiced the opinion of a majority of the people of the United States when he said, "Taxation and representation are strongly associated in the minds of the people ; and they will not agree that any but their immediate representatives shall meddle with their purses." " A final feature of this contest over the relative powers of the two branches of the colonial legislatures is of in- terest. It appears that the practice of placing "riders " ^ on appropriation bills had been in some States, at least, a common one. The earlier method by which the popular branch of the assembly had sometimes forced approval of desired legislation had been to hold back the supply bills until such approval had been secured. It is possible that the practice of using "riders" grew out of the earlier cus- 1 See Adams, Control of the Purse, 176-181; Gilpin, Madison Papers, 1609. 2 See Madison Papers, 1300-1315. ' Madison Papers, 1315. * Madison Papers, 1309. 5 By means of "riders^' it is sometimes attempted to incorporate general legislative pro- Tisions into appropriation bills so as to compel the other branch of the legislature either to accept the general legislation or to refuse the appropriations. 224 BULLETIN or THE TNIVERSITY OF WISCONSIN. torn. The first constitution of Maryland prohibited the in- corporation of any extraneous matters into appropriation bills. A similar provision is found in the constitution adopted by Delaware in 1792. (F) The Development of Unity in Budgetary Procedure. In certain modern countries a large measure of unity has been introduced into budgetary methods by providing in a single enactment for all matters of revenue and sup- ply. Where such complete formal unity has not been se- cured, the necessity of balancing revenue and expenditure will secure a certain fundamental unity in budgetary pro- cedure, as is the case in the United States. A formal unity, however, will secure a better adjustment of public resources and needs; and is, for that reason, desirable. This important fact has received too little attention in the United States on account of the ease with which our fed- eral expenditures have been met from the proceeds of in- direct taxes. In the earliest periods of colonial history we can not ex- pect to find much unity in the management of revenues and expenditures. This could not be secured until settled conditions were developed, and until regularity was intro- duced into financial transactions. By 1775, however, it is possible to detect considerable advance in budgetary pro- ceedings in the direction of unity. This is important on account of the influence which it may have exerted on the procedure of the Continental Congress. It is necessary, therefore, to refer to this feature of colonial finance. These investigations have been confined mainly to the col- onies of Massachusetts, New York , Pennsylvania, Virginia, and South Carolina, in which the finances had reached the most advanced stage of development found during the colonial period. Before speaking of the budgetary methods developed in Massachusetts, it is necessary to refer to the forms and methods of taxation employed in that colony. From the BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 225 earliest times the chief reliance had been upon direct taxes, of which property and poll taxes were the principal forms. ^ These were apportioned among the various towns of the colony, and were assessed and collected by local au- thorities. The final receipt of these taxes was generally aintlcipated. In 1690, on the occasion of a tax levy of £40,000 for expenses incurred during the first of the colo- nial wars, the government issued treasury notes payable in one year, by way of anticipating the collection of the tax. This practice soon became regular, and the time for the redemption of the notes was gradually ex- tended until it became thirteen years. Only a portion of the issues was redeemed each year. Thus, it was thought, the weight of taxation might be lightened by distributing the burden over a series of years. The evils of such a system finally became so great that about 1750 there began a transition to the method of resorting to loans in antici- pation of the future yield of revenue measures. Thus the issue of treasury bills, which were virtually a paper cur- rency, ceased until the time of the Revolution. Manifestly this practice complicated the budgetary methods of the colony. ' At an early date indirect taxes were introduced in the form of excise and import duties. ° These were resorted to in order to ease the burden of direct taxation, but they always formed a subordinate part of the revenues of the colony. A feature of interest is that these duties were, in the provincial period, re-enacted yearly, and were not allowed to offer the royal governor a permanent source of revenue. The combination of direct and indirect taxes in the financial system of the colony is a point of great signifi- cance in the development of budgetary methods. The pol- 1 Douglas, Financial History of Massachusetts, 59-76. 'On this subject, see Douglas, Massachusetts, 117-135; Felt, History of Taxation in Massachusetts; Sumner, American Currency. ' Douglas, 32-33, 78-95. 226 BULLETIN or THE UNIVERSITY OF WISCONSIN. icy of the lower house of the legislature during the first half of the eighteenth century has been characterized by Mr. Douglas' as " a persistent refusal to raise by direct taxation one penny more than a sum calculated, not always . accurately, to be just sufficient, when added to all the other revenues of the province, to cancel maturing obli- gations, and in the abandonment of the constantly increas- ing current expenses of the government to be met by larger and larger issues of bills of credit." In this dispo- sition to limit the levy of direct taxes to the exact amount required over and above all other receipts, there was a powerful force making for an exact adjustment of rev- enues to expenditures, something that can be secured only by budgetary unity. Furthermore, the apportionment of direct taxes among the towns must have furnished the representatives with an additional incentive of the same character. Beginning with the history of Massachusetts as a royal province, we find that, for several years, the revenues were raised by grants of direct and indirect taxes, "for the defense of his Majesty's subjects and interests," and for other equally vague and general purposes. Moreover, the revenue measures of each year were commonly four in number, and there was no budgetary unity. Duties of impost and excise were granted by separate yearly acts, and a third bill regularly provided for the issue of treas- ury notes to meet current expenses. Finally a fourth measure imposed "assessments on polls and estates" to meet the installments of earlier issues of bills falling due within the year. Some sort of adjustment of revenues to ex]penditures was secured through the efforts of the lower house of the legislature to avoid levying direct taxes in greater amount than was required, after allowing for the receipts from other sources of revenue. As we approach the year 1730, certain expenditures are 1 Financial History of Massachusetts, ISl. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 227 made specific in object and amount, and are provided for in separate bills. Thus the governor's salary and the pay- ment of members of the Council and House of Representa- tives were voted separately in bills which, after a time, came to carry with them special tax levies for these pur- poses. Thus, a closer control was exercised over objects of expenditure, but at the expense of budgetary unity. In 1733' there appears a great advance in the direction of unity. After reSnacting the law imposing impost duties, and providing for a levy of direct taxes for redeeming the amounts due on quotas of treasury bills previously issued, the legislature proceeded to bring together into a single budget the expenditures for the service of the year. The law accomplishing this was entitled: "An Act for Supply- ing the Treasury with the Sum of Seventy Six Thousand Five Hundred Pounds, Bills of Credit, for Discharging the Public Debts, and for Establishing the Wages of Sundry Persons in the Service of the Province." This act pro- vided : I. Fixed salaries for the soldiers in the employ of the province; II. That £76,500 bills of credit should be issued, and that these funds should be devoted to the various public ex- penses "as ascertained or as fixed by law. " These amounts were all specified, and included a reservation for future. grants to be made by the legislature during the session. III. That all balances of sums appropriated should lie in the treasury. IV. That during each of the eight following years, taxes should be levied in an amount necessary to redeem the in- stallments of bills of credit that should fall due annu- ally. Thus a large degree of budgetary unity was secured. During the entire year only two supplementary appro- priations were passed, these providing for the governor's salary and for repairs on Castle William. 1 See Acts and Eesolves, II. 690. 228 BULLETIN OP THE UNIVERSITY OP WISCONSIN. After this date budgetary legislation retained about the same form until the last of the colonial wars broke in upon the unity which this arrangement had secured. Large sup- plementary grants of taxes and appropriations were often called for during these wars; and the former unity could not be preserved. After 1763 the finances were in a dis- ordered condition owing to the large debts left by the wars. But by 1770 order was in some degree restored. The budget of 1774 ' will illustrate the final form of develop- ment in the methods of this colony. Its provisions were as follows: I. That £14,550 should be borrowed on the credit of the province. II. That this sum should be expended in specific amounts for purposes enumerated in the act, " and for no other pur- poses whatsoever." III. That £10,300 should be assessed on polls and estates; and that the receipts from imposts should be used as a further fund for redeeming the loan of £14,550 with in- terest. The only other budgetary measure for this year was an act imposing taxes for outstanding obligations incurred in previous years. Thus, at last, almost complete budgetary unity was secured. During the following year war expenditures came in to disturb existing arrangements. Once more, as in the time of the previous wars, supplementary appropriations and addi- tional revenue measures were necessitated. Thus unity was again destroyed. It is probably safe to attribute the growth of a unified budget in this colony to the calculating and parsimonious character of the policy of the representatives' This conclusion does not necessarily exclude all possibility of an influence having been exerted by the example of English methods. But it does seem certain that within the colony itself existed conditions which are a sufficient explanation of the course of budgetary development. 1 Acts and Eesolves, V. 39O-303. BULLOClj; — FINANCES OF THE UNITED STATES, 1775-89. 229 In New York indirect taxation was developed earlier than direct." During the seventeenth century indirect taxes were the most important source of revenue possessed by the colony.- Gradually the general property tax was de- veloped, but indirect taxes remained more important in New York than in any other of the northern colonies.'' The impost duties were continued in operation from year to year, as were all other revenue measures after a time. In no colony was the principle of limited revenue acts maintained with greater persistence. Appropriations were, at first, made in gross, and applied at the discretion of the governor and council.^ Also there -was no attempt to include all such measures in a single bill. But in 1739 appropriations were made specific both in objects and amounts, and salaries were granted to officials by name.^ After this date most of the expendi- tures are included in a regular appropriation bill prepared by each Assembly. During the colonial wars supplemen- tary appropriations were made in great numbers, but the method of including all ordinary expenses in a single annual bill still continued. It does not appear, however, that there was a co ordina- tion of revenues and expenditures in a single budget. In 1774 and 1775 we fiad a condition that much resembles the methods of our national government at the present day. No new revenue measures were passed in those years, while it was provided in the annual appropriation bills that the au- thorized expenses should be defrayed out of the proceeds of the indirect taxes collected under the laws then in opera- tion.' During the Revolution supplementary appropriations 1 Schwab, New York Propei ty Tax, 19, 104. ' Hill, Tariff Policy of the United States, 37, 3S. = Ibid , 37. * See Smith, History of New York, 425 seq.; Magazine of American History, III. 165-167; also a speech by Clinton, in Journal of Council, 10^23. ' Here we follow the Laws of New York and the Journal of the Council. • See Laws of New York; Roberts, History of New York, !i87; Smith, New York, 433. ' See Laws of the Colony of New York, 1774-1775, 61, 94. 230 BULLETIN OF THE TJNIVER8ITT OP WISCONSIN. became numerous once more, as was the case in the other colonies. Down to the opening of the Revolution the budgetary methods of Connecticut seem to have remained in a condi- tion of primitive simplicity. Prom the proceedings of the Connecticut Assembly in 1771 we can derive information on this subject during what may be regarded as a typical year. During the May session the Assembly at various times appropriated all sorts of petty sums in payment of claims and of public services.' Thus the colonial treasurer is instructed to purchase an iron chest for the custody of public moneys." Toward the close of the session the As- sembly authorized the payment of half of the annual salaries of the governor, deputy governor, treasurer, and secretary.' At the October session we meet with much the same procedure.* At this time also a taxis levied" for "incidental charges of government, " and the colonial treas- urer is instructed to settle with the members of the Assem- bly for their expenses in attending the session. ' Perhaps an explanation is to be found for these primitive budgetary methods in the fact that Connecticut, in its long existence under the original charter, did not witness those contests between the Assembly and royal officials which in the other colonies proved productive of principles of budgetary pro- cedure. In Pennsylvania there existed a more highly developed system of finance. Here the early struggle for specific appropriations had resulted in a system of money grants specifying the objects of expenditure.' But no unity ex- sted in early times; and, in some years,' we find as many I Public Records of Connecticut, XIII. 424, 471 . ' mi, 426. = Public Records of Connecticut, Xm. 502. *Ibid., 518, 657, 666. » Ibid., 516. •Public Records of Connecticut, XIII. 566. ' Bancroft, n. 25, 26, 27; Franklin, Historical Review of Pennsylvania, 32; Minutes of the Provincial Council, I. 457, 468, ct seq. ws of Pennsylvania, I. for 1715 and 1718. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 231 as three or four separate revenue measures. During much of the time, also, paper money exercised a disturbing in- fluence. After the middle of the eighteenth century, however, considerable progress was made in the direction of budget- ary unity. The specification of the objects of expenditure seems to have become more strict. By 1755' the methods of procedure resembled those of Massachusetts. Bills of credit were issued for specified purposes, and taxes im- posed to provide a fund for the redemption of the notes. The colonial wars here, as elsewhere, proved to be a dis- turbing influence. But after 1763 supplementary acts became less common; and in 1775 we find but a single measure providing " for the support of government and the payment of public debts. " In the matter of budgetary development, Virginia pre- sents nothing new. Here, as elsewhere, the earliest at- tempts to control expenditures took the form of specifying in revenue bills the objects for which money should be raised. After a time special appropriation bills became common. Salaries and many of the ordinary expenses came to be strictly fixed by law, but there was no system of regular appropriations for such purposes. In the direc- tion of formal budgetary unity little progress seems to have been made. As late as 1772 three revenue laws and four special appropriations are passed during the sessions of a single assembly.' From the year 1721 South Carolina presents interesting budgetary arrangements. After the Revolution of 1719 had overthrown proprietary control and resulted in the formation of a royal colony, the government had to be sup- ported by taxation instead of by the proceeds of the quit rents, which had sufficed for the ordinary needs of the proprietary administration. Annual tax laws were passed at the opening of most of the fiscal years; and, after 1721, ' Laws of PenDsylvania, I. cnapt, 406. " Hening's Statutes at Large, VIII. 232 BULLETIN OF THE UNIVERSITY OP WISCONSIN. these laws included "long appropriation clauses, appro- priating every penny raised to some specific object. " In later times the tax bills v^ere not prepared until several months after the close of the fiscal year. Besides these direct tax levies, the colony derived considerable revenues from impost and tonnage duties, and from other sources of a miscellaneous character. These indirect taxes were not included in the annual budget; and, consequently, com- plete unity was not secured.' These investigations, incomplete as they are, show that in Massachusetts, Pennsylvania, and South Carolina, at least, a considerable degree of formal budgetary unity was xealized before the Continental Congress met in 1775. In the various colonies there existed important differences in the various stages and the final results of budgetary devel- opment. Great resemblances are also to be found, but these may safely be attributed to the existence of similar problems, which called for similar solutions. There seems to be no evidence to support the view that, to any large extent, the colonies reproduced each other's budgetary methods; or that they consciously imitated those of England. In most cases the differences of procedure are too great to admit of such a hypothesis. In Massachu- setts, where perhaps the greatest degree of unity was in- troduced into the budget system, we have found special conditions that furnish a sufficient explanation for the es- tablishment of a more unified procedure. It is manifestly impossible to exclude all possibility of attempts to copy English forms and methods. But, on the whole, it is safest to affirm that colonial budgetary development was shaped principally by the force of local conditions, and in accord- ance with local needs. 1 On this subject see Whitney, Government ot the Colony uf South Carolina, 9T et seq. BOLLOCK — FINANCES OP THE UNITED STATES, 1775-89. 233 CHAPTER III. THE DEVELOPMENT OF A BUDGET SYSTEM BY THE CON- TINENTAL CONGRESS BIBLIOGRAPHY. Bayley, History of the National Loans; Belles, Financial History of the United States, I.; Curtis, History of the Constitu- tion of the United States; Fiske, Critical Period of American History; Hildreth, History of the United States, III., see Index on "Estimates," "Expenditures," " Requisitioiis" ; Journals of Co7igress, 1775-1788; McMaster, History of the People of the United States, I.; Small, American Nationality, 70-73; Sumner, Financier and Finances of the American Revolution; Sparks, Diplomatic Correspondence, XII. The foregoing study of the results of budgetary develop- ment in England and in the thirteen colonies previous to 1775 has prepared the way for a discussion of the various steps by which the Continental Congress developed a budget system. It will be found, that the various parts of the financial system of the Revolution were developed separately, but were finally brought together into a uni- fied budget. This discussion will also show what were the forces operating to produce this result. {A) The Early Management of Revenue and Supply. On the third of June, 1775, Congress appointed a com- mittee of five members to "bring in an estimate of money necessary to be raised" for the defense of the colonies. Pour days later the committee submitted a report which was considered in committee of the whole for several days, until, on June 22, Congress resolved to issue the first bills 234 BULLETIN OF THE TNIVERSITT OF WISCONSIN. of credit. A month later,' a second committee was ap- pointed "to bring in an estimate of the expenses incurred by the votes and resolves of this Congress. " It is very- probable that it was the report of this committee which in- duced Congress to vote a second emission of paper moneJ^■' Early in November' another committee was in- structed "to examine what money remains in the treasury unapplied, and to form an estimate of the public debts al- ready incurred, and which will become due on the first day of June next." A few weeks later," upon the report of this committee "on the state of the treasury, " the third issue of paper money was authorized. Then, in December, in pursuance of a further report. Congress urged upon the colonies the necessity of making provisions for redeeming their quotas of the bills of credit. In the manner above mentioned, $6,000,000 of paper money was issued by the end of 1775, this sum being intended to provide for the expenses of that year and for the debts that should be incurred up to the following June. We have next to inquire into the methods by which this money was applied. When Congress assumed the control of the strug- gle against Great Britain, large expenses were incurred. For some of these provision was made in special appro- priation bills . Thus in June" the army establishment was determined, and the pay of the officers and soldiers fixed by law. On the first day of August a number of appropria" tions were made, one of which provided that $500,000 should be immediately forwarded to be applied to the sup- port of the army in Massachusetts, in such manner as General Washington should "limit and appoint;" and that, if this sum should be expended before the next meeting of Congress, General Washington should be empowered to ijuly 19. " ' ' » July 25. ' Nov. 6. < Nov. 29. » Dec. 26. •June 14, 1516; July 27, 1775. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 235 draw on the Continential treasurer for $200,000 additional. The other appropriations were also for lump sums, and the objects of expenditure were specified in an equally loose and general manner. In September' Congress appointed a Committee of Accounts or Claims, which for nearly a year examined accounts against the government and reported the amounts due, whereupon payment was ordered. Thus was inaugurated another method of applying public money, which lasted for several years. During this time we find Congress con- stantly appropriating all sorts of petty sums, such as $13 for a present to Indians, or $12 for ferriage and horse hire. A third method of applying public funds was to advance money to the assemblies of different colonies to be ex- pended and accounted for.' Similarly delegates and com- mittees of Congress were entrusted with the expenditure of large sums, which were placed in their hands for defi- nite purposes, and for which they were expected to ac- count.^ In this way $500,000 was expended for the first naval armament. The revenues for 1776 were derived from further issues of bills of credit. In February,' Congress, on a report from the committee on the treasury, resolved to emit $4,000,000 of the paper money; and to appoint a Standing Committee on the Treasury, to which reference has already been made in the discussion of the administration of the finances. This body, which was generally known as the Treasury Board, soon came to act as a committee on ways and means; but first Congress resorted to another com- mittee for that purpose. On March 13 it was resolved to appoint a committee of seven, to " inquire and report the best ways and means of raising the necessary supplies to defray the expenses of the war for the present year, over 1 Sept. 25. a Aug. ] ; Deo. 12, 1775. 2 Aug. 1; Dec. 16. 88, 1775. * Feb. 17, 1776. 236 BULLETIN OP THE UNIVEKSITY OP WISCONSIN. and above the emission of bills of credit. " It has been impossible to ascertain whether this committee ever made any report. On the sixth of May, however, Congress, after resolving itself into a committee of the whole to consider "bhe state of the United Colonies," decided that $10,000,00a should be raised for the service of the year. At the same time another committee of ways and means was directed to devise methods for raising the money. This committee reported three times during the remainder of the year, and in the following February;' and on each occasion Congress passed some measure for raising money by means of issues of bills of credit. In October, the Treasury Board reported a plan for raising funds through a domestic loan ; and, during the next year, reported estimates and plans for further emissions of paper. ^ During this year there was no advance over the early methods of appropriation. Large sums were still placed in the hands of individuals for the purpose of meeting public expenses.'' After July 30, accounts against the government were reported by the Board of Treasury, and the old Committee of Accounts was discharged. The work of systematizing appropriation methods was accomplished very slowly. At the opening of 1777,* Congress resolved itself into a committee of the whole " to take into further consideration the state of the treasury and the means of supporting the credit of the Continental currency. " As a result of these delibera- tions it was resolved to urge the States to resort to taxation during the current year. In May^ the Treasury Board was in- structed to "prepare and report to Congress an estimate of the public expenses for the present year, distinguishing in such estimate the expenses of the commissary, quarter- master, and barrack master general, and the medical de- 1 May 9, July 2-2, Nov 2, 1776; Feb. 22, 1777. ' 2 Oct. 3, 1776; August 13, 15, Nov. 7. Deo. 3, 1777. ^ E. g. Journal of Congress, July 20, 31, 1776. ■* January 13, 14. = May 15. BULLOCK — FINANCES OF THE UNITED STATES, 1775-80. 237 partment;" and "to confer with the marine board and Gen- eral Schuyler on this subject. " Congress had not yet come to appreciate the necessity of preparing the estimates before the opening of the year; but this action was an advance over previous methods of procedure. The statements called for were to be prepared by the Treasury Board after conference with the other departments, and were to be presented in some detail. At this same time, a new com- mittee was appointed to 'consider ways and means of de- fraying the expenses of the present year;" and instructed to "confer on this subject with the Board of Treasury." It is not possible to determine what action the committee took. It may have presented some of the reports upon which new emissions of paper money were ordered, but the Journal of Congress does not enable us to decide. In No- vember,' on the occasion of a report from the Treasury Board, Congress made its first requisition on the States, calling for $5,000,000. Up to this time there had been a constant effort to esti- mate probable expenses, and to regulate the issues of paper according to the probable needs. This is as far, however, as unity in budgetary procedure had been developed. The ease with which revenues were secured by the emission of bills of credit had not been favorable to carefulness and ac- curacy in adjusting revenue to needs. But with the year 1778 conditions are altered. The paper money begins to depreciate alarmingly; greater efforts are made to increase the receipts from loans; and taxes come into a position of greater importance. These facts lead to improvements in budgetary methods. (B) The Development of Unity in Budgetary Procedure. During 1778 the Treasury Board, acting as a committee on ways and means, continued to submit its reports ; and they were the occasion for the emission of the paper 1 November 23. 238 BTLLETIN OF THE UNIVERSITY OF WISCONSIN. money issued during the year. The first half of the year saw no change in budgetary methods. But, as the depreci- ation of the bills of credit increased, and the financial situ- ation became more difficult, it was evident that, in the future, the dependence of Congress must be upon taxation. To this fact we can safely attribute a change in procedure which now occurred. In August, Congress set apart three days each week for the special consideration of the finances.' In the same month, ^ also, the Standing Committee on Finance was ap- pointed, ■■ to consider the state of the money and finances of the United States, and report thereon from time to time." Robert Morris was chairman of this committee, which, in November," submitted a " plan of finance " for the ensuing year. Prom the action taken by Congress we can infer that this plan was intended to provide, first, for the security and ultimate redemption of the bills of credit; and, second, for the expenses of the ensuing year. A dili- gent search among the manuscripts in the library of the State Department has brought to light only that part of the plan which relates to the bills of credit. This contem- plated the withdrawal of 146,000,000 of the notes from cir- culation, and the gradual redemption of the others. Congress considered this plan in committee of the whole for many days, and finally called on the States for f 15,000,000 for the expenses of the ensuing year, and for $6,000,000 annually for eighteen years, as a fund for sink- ing the loans and issues of the United States. Undoubtedly we may regard this action as a budgetary forecast and pre- vision for the whole of the public debt, and at least a large part of the expenses for 1779. It seems probable, also, that this act carried with it the authorization of many of the regular expenses for this year. In the Journal of Congress we find no appropriati ons for such purposes dur- 1 August 12, 13, 1778. ■ ~ ■ = A 'Nov. 10. 'Dec. 16, 31, 1778; Jan. 2, 1779. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 239 ing 1779; -while an act of September 15 makes it evident that expenditures are being made under the direction of the heads of deparcments, in accordance with the authorized appropriations. Unfortunately, the States complied but poorly with the call of Congress for taxes. More than this, the depreci- ation of the paper money steadily increased, and rendered these last measures of Congress quite ineffectual. The Treas- ury Board brought in frequent reports, in accordance with which $140,000,000 in bills of credit was issued during the year. By May^ the paper had so far depreciated that Con- gress added $45, 000, 000 to the quotas of taxes required for that year. Shortly after, on the occasion of a similar re- port, it was decided to open another domestic loan of $20,000,000. By the close of the year, the issues of paper had been exhausted; and Congress was thenceforth obliged to look to taxes and to loans for the revenue necessary to conduct the government. Thus the "plan of finance" proved a complete failure, owing in large part to the refusal of the States to respond to the demands of Congress. All this, however, does not prevent the acts of December, 1778, from constituting a definite advance in the formal order- ing of the national finances. Up to this point we have not considered the foreign loans secured by the United States. These did not yield large sums until 1780; and were, at the start, devoted to the payment of interest on the domestic debt. They were not included in the annual estimates until a later period. Even then, there was a separation of the expenditures at the treasury and those made in Europe. We now come to the provisions for the service of 1780. On October 6, 1779, Congress made a requisition on the States for $15,000,000 monthly for eight months. In this it is noticeable how greatly the amount of the requisition has been increased by the depreciation of the bills of credit. But Congress did not dare to depend on the State 1 May 19, 1779. 240 BULLETIN OF THE UNIVERSITY OF WISCONSIN. to provide sufficient taxes iii money, and was fearful for the future of the paper currency. Accordingly, specific supplies were called for. On December 2, the Board of War was directed to report an estimate of the provisions re- quired to supply the army for one year, and the Marine Committee was instructed to report an estimate of the pro- visions necessary for the navy. Then a committee was appointed to devise means of procuring such supplies, and it was decided to resort to specific requisitions on the States for this purpose.' Early in 1780^ a general requisi- tion was made for the supplies necessary for that year. Thus, despite the inattention of the States to its call for taxes, Congress continued to make provisions for the needs of the ensuing year. In March " Congress passed the "Forty for One Act, " and practically repudiated the bills of credit. After this the specie basis was restored, and the States were called upon for 13,000,000 in specie for the immediate expenses of gov- ernment.' In the last of the year provision was made for the service of 1781, and a requisition for $6,000,000 was- voted.' This was payable partly in specie and partly in specific supplies. Unfortunately the Journal for this year is so incomplete that it is impossible to ascertain from what sources Congress obtained the estimates upon which this requisition was based. At the opening of 1781 the condition of the finances was so critical as to call for immediate attention. Congress sent to the States a most earnest appeal, asking that $879,000 be immediately forwarded for the pay of the army; and that, in the future, requisitions be promptly complied with. Early in February ' Congress asked for authority to lay a 1 Dec. 11, 14. 2 Feb. 2B. 3 March 18. » August S6. ^ November 4. •Jan. 15, 1781. 'Feb. 3, r. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 241 five per cent duty on imports, the proceeds of which should be devoted to discharging the principal and interest of the public debt. During this same month Robert Mor- ris was appointed Superintendent of Finance, and thus a more efficient administration was secured. A protracted consideration was then given to the subject of finance. On March 16 a requisition was ordered for $6,000,000, payable in quarterly installments, commencing with the first of the following June. A committee was then appointed "to estimate and state the amount of debts due from the United States, with the necessary estimates for the current year, ... in order that the same may be laid before their respective legislatures. " Fortunately, this report is contained in the Journal; ' and it deserves attention as the first complete financial statement that has been preserved. The report contains, first, a statement of the public debt reduced to a specie basis; second, the estimated expenses of the current year; and, third, the total revenues at the command of Congress for the whole of 1781. The necessary expenses were estimated at $19,407,000; while the total resources, supposing that the States should pay in full the existing requisitions, were only $17,668,000. In an earlier chapter it has been shown how far these estimates of expenditures exceeded the actual amount which the government was able to expend.'' In the fall the Board of War was called upon for esti- mates of the expenses of the military establishment for the ensuing year. The report submitted by the Board was referred to a committee of three members, which added the estimates for the civil list. On October 30 and November 2 Congress voted a requisition of $8,000,000 "for the war department and civil list the ensuing year." Strangely enough, it appears that the Superintendent of Finance saw 1 Appendix, April 18, 1781. « See p. 175. 242 BULLETIN OF THE UNIVERSITT OF WISCONSIN. nothing of the estimates on which this action was founded, ^ although in former years the heads of the treasury department had been consulted in such matters. On No- vember 17 Morris forwarded to the governors of the States this act for raising the supplies for 1782." It will now be necessary to refer to the development of a system oi appropriations. The earliest methods of applying public moneys have been already explained. = As time went on, and more complete estimates were formed for the serv- ice of the ensuing year, the expenditures thus authorized were made under the direction of the executive depart- ments." Congress continued to pass laws that authorized new and unforeseen expenditures; but, by making general provision for necessary expenses, it relieved itself of the necessity of constantly appropriating petty sums, and such action became less frequent. But in appropriation bills there was little effort to specify the objects and amounts of expenditure, except in the most general way; and the greatest latitude was consequently left to the executive officers. So far as can be ascertained, it seems probable that Robert Morris was the only head of the treasury depart- ment that did not divert large sums from the original ob- jects of appropriation, and apply them to other purposes. As fast as the work of the government developed, cur- rent expenses were fixed by law. By repeated acts the establishment and pay of the army and navy were regu- lated." As the executive departments were established, the number and the salaries of the officials were deter- mined; and the expenses of the "civil list" " thus regu- 1 Sparks, Diplomatic CorrespondeDce, XIT. 8-9. 2 Ibidem, 16. 'Seep. 234etseq. ■• See Journal of Congress, Sept. 15, mO; June 28, 1781. » Journal of Congress, June 14, 15, 16, July 35, Nov. 28, Dec. 9, 1775; May 24, Nov. 15, 1776 ; May 27, 1778. • TWs term is evidently borrowed from England, but is used in the Journals of Congress and elsewhere to denote the entire civil establishment. This is diCEerent from the tech- nical meanhig given to the word in the English budget, see p.^13. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 243 lated. In 1780' the salaries of the entire establishmeat •were readjusted; and, two years later, the expenses of foreign envoys and officials were brought under stricter control.^ In 1777 ^ it had been resolved to pay the interest on the domestic loans with the money secured in Europe. In ac- cordance with this plan Congress was obliged each year to make an appropriation for this purpose.* This continued to be done until March, 1782, when such payments could no longer be made. Private claims, during all this period, were first examined by the treasury department; and then referred to Congress, by which body payment was ordered, in case the claims received favorable action. Thus by 1782 some degree of order had been established in the authorization of expenditures and the application of public money. The expenses of the army, navy, and civil list were provided for by a reasonable number of appro- priations, most of which were included in the annual ap- propriation bill. The payment of interest on the public debt was authorized at more or less regular intervals, and private claims were passed upon by Congress as fast as they arose. The budgetary legislation of 1782 now claims attention. In this it is possible to trace the skillful hand of Robert Morris. In January ' Congress called upon the Secretary of Foreign Afiairs for estimates of the expenses of foreign ministers, with a view to exercising more control over these expenditures, which had been in the past loosely managed. In July Morris urged upon Congress the neces- sity of providing "solid funds for the national debt," and advocated for this purpose direct and indirect taxes, to be raised by the gen eral government. ° This was in line with 1 August 11, Sept. 13, Sept. 25. a Journal of Congress, Jan. 2, June 5, 1782. • Sept. 9. • E. g. Journal of Congress, August 3, 1780. • January 2, 1782. Sparks, Diplomatic Correspondence, XII. 211-338. 244 BULLETIN OF THE UNIVERSITY OP WISCONSIN. the determined effort then being made to secure for Con- gress the right to establish revenues of its own. It has al- ready been seen that these efforts failed. Up to this year Congress had tried to pay the interest on the loan office debt out of the proceeds of the foreign loans; and had, from time to time, provided that bills of exchange should be drawn for this purpose. Now, however, this could no longer be done ; and in September ' it was resolved to levy a re- quisition for §1,200,000, in order to pay the interest on the whole of the domestic debt, so far as it had been liqui- dated. This subject was previously considered by a grand committee, consisting of one member from each State. It is interesting to notice that on this occasion no less than eight States attempted to reduce the amounts required of them, and to throw the burdens onto other States. One month later ^ the grand committee reported the es- timates for 1783. These were prepared by Morris, and we have preserved to us the letter ' in which he transmitted them to the President of Congress. It was part of the plan of Morris to secure a foreign loan for a portion of the serv- ice of the next year; and Congress had previously author- ized the negotiation of a loan for ^5,000,000.' The appro- priations were finally fixed as follows : " For the army f;5,266,509 For the marine 300 000 For the civil list 18l'214 For contingencies 'Ao2 277 $6,000,000 Requisition had already been made for the $1,200,000 nec- essary for interest on the domestic debt, and it remained to provide for this six millions of current expenses. It was finally resolved ° that the States should be called upon for 1 September 4, 10, 1783^ ' ' 2 October 16, 'Sparks, Diplomatic Correspondence, XII. 238-241. * September 14, » October 16. • October 16, 18. V" BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 2-1:5 $2,000,000, and that further requisitions should be suspended until the result of the attempt to secure a foreign loan should be known. Thus the years 1781 and 1782 witnessed the establish- ment of a large measure of unity in the budgetary pro- cedure of Congress. All the ordinary expenses of the government, including the greater part of the war expen- ditures, were provided for in a single enactment, which also fixed the amount of the requisition for the ensuing year. In 1782 separate provision was made for the domes- tic interest, but this did not impair seriously budgetary unity. The first steps in the establishment of this system were taken at least as early as 1778 in the "plan of finance" adopted for the service of 1779. During 1779 and 1780 Con- gress still attempted to appropriate in a single enactment for the expenses of the following year, and to provide the supplies necessary for this purpose. In this way a unified budget system was finally established. At first thought one might be inclined to attribute the development of such a budget to the influence of English precedent. But the previously described investigations into the financial methods of the colonial period have shown that in one or two colonies budgetary unity was developed before 1775. If, then, we are to look upon the action of Congress as an imitation of methods elsewhere existing, it becomes necessary to admit that earlier colonial exper- ience would naturally exercise a stronger influence than even contemporary English procedure. But such an expla- nation is insufficient since other elements must be taken into consideration. To these some reference has already been made. It is evident that the introduction of really unified budget management dates to the " plan of finance" adopted in 1778. Now, it was in that year that the depreciation of the paper money, and the threatened exhaustion of this source of revenue, brought taxation into a more important position 246 BULLETIN OF THE UNITERSITT OF WISCONSIN. than it had previously occupied among the possible sources of income. From this time on Congress began to make earn- est efforts to secure by the system of requisitions a consider- eable portion of the funds necessary to carry on the war This fact necessitated a change in budgetary methods. The ease with which money had been obtained previously by the issue of bills of credit had rendered unnecessary an exact adjustment of revenue and supply, although some efforts had been made in that direction, as we have seen. But the development of the requisition system made such an adjustment an absolute necessity. The States had by this time begun to insist on their own claims of sovereignty ; and, the first patriotic fervor abating, there had appeared those jealousies and selfish bickerings that characterized the en- tire history of the Confederation. No State, therefore, was willing to raise in taxes for national purposes a cent more than the amount which it believed to be its fair quota under the requisition system; and it was certain that all would insist that Congress should so adjust revenue to supply as to make it clear that all taxes demanded were reasonable and necessary. It is a matter of history that, as long as the system of requisitions was continued, the States were constantly complaining that the taxes required were excessive in amount and unfairly apportioned. In the case of the requisition made on September 10, 1782, we find eight States seeking to shift to the shoulders of others a portion of the quotas assessed upon themselves. All this is, as we have seen ,' a characteristic feature of the financial history of all confederations. In such unions there is always "a jealous reckoning of advantages and sacrifices" among the various members; and it is, there- fore, necessary to secure an exact adjustment of income and expenditure, and an accurate apportionment of financial burdens among the different units. This is exactly what took place in the Continental Congress ; and 1 See p. )20. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 247 ■we find such a budgetary procedure adopted only when it became clear that, in the future, greater dependence must be placed upon the requisitions on the States. To this fact we must ascribe the chief influence in the development of budgetary unity. Of course, this conclusion does not exclude the possi- bility of outside influence. But this, if it operated at all, was unable to produce unified budgetary methods until the adoption of the requisition system made such action neces- sary. English and colonial experience may have served to facilitate the growth of the system that was finally developed; but the existence of such possible influences is not, in itself, a sufficient explanation of the course of budgetary develop- ment. The very conditions under which Congress existed made budgetary unity of some sort an absolute necessity; and thus the adoption of the requisition system appears to have been the fundamental cause of the development of the budget in the form in which we find it in 1782. A final fact will strengthen this conclusion. Most of the European expenses of the United States were defrayed out of the proceeds of foreign loans, and the greater part of the money so expended did not pass through the treasury. Now these expenditures were not all included in the bud- get. Millions of dollars were spent in this way, and never accounted for. Evidently, Congress cared very little about securing budgetary unity in any case where there was no need of immediately levying requisitions to meet the public needs. ( C) The Budgetary Methods of the Later Years of the Confed- eration. In 1782 budgetary methods seem to have crystallized in- to a form which was thereafter maintained. In one point, however, we shall have to notice a retrogression which is extremely significant, as indicating a change that had taken place in the character of Congress. 248 BULLETIN OF THE UNIVERSITY Or WISCONSIN. In 1783 the army was disbanded, and the expenses of government began to be reduced by Morris to the lowest possible figure. But the responses of the States to the requisitions of 1781 and 1782 were very tardy and inade- quate; and, even from the beginning of the year, the financial situation was extremely critical. Congress sought to provide for the funding of the public debt, but was finally' obliged to resolve that for the present all effort ought to be confined to providing for the interest. Then Morris was called upon for an estimate of the principal of the debt up to January, 1783 .^ Shortly after a committee was appointed ' to consider ways and means of supporting public credit. " On March 18 this committee brought in a report which was discussed for several days. Finally" it was resolved to ask again from the States authority to levy duties on imports ; to urge that by other taxes the States should provide substantial revenues of 11,500,000 annually; and to request that all States that had not already ceded to Congress their claims to western lands, should at once do so, as a means of establishing harmony and hastening the extinguishment of the debt.* This resolution was to be accompanied by an address prepared by Hamilton, Madi- son, and Ellsworth,' in which the necessity for such action was set forth; and also by Morris's statement of the public debt.= During the remainder of the year. Congress waited for a reply to its recommendations, and made no provision for the service of 1784. All the efforts of Morris, Hamilton, and others were exerted to secure from the States the power to levy the impost; but the request was again re- fused, and the financial situation remained unaltered. 1 Jan. 30, 1783. 2 Feb. 3 April 18. * Of. Resolutions of Sept. 6, Oct. 10, 1780. » April 24, 29. « Joumai;o£ Congress, April 29. BULLOCK- -riNANCES OF THE UNITED STATES, 1775-89. 249 Thus at the beginning of 1784 no provision had been made for the service of that year, but it was not until April that Congress made up the budget. It was desired to provide if possible for the interest on the debt as well as for the running expenses of government. Continuing the cus- tom of 1782, the estimates were prepared by a grand com- mittee of which Mr. Jefferson was chairman. We possess a letter^ written by Morris to Jefferson, transmitting esti- mates for the civil list, which he placed at $184,300. The budget' presented by the grand committee contained the following estimates and recommendations. I. Necessary expenditures: The civil department S 107 525 The military department 200 000 The marine department 30 000 Indian department 60 000 Contingencies 60,000 3457,535 33 Deficit on service of 1732 and 1783 1, 000, 000 Interest on foreign debt §443 648 Interest on domestic debt, with arrears 3,580,030 4,032,678 Total expenditures §5,480,303 33 II. Resources of the government: Balance due the government on requisition of October, 1781 S5, 613,483 28 Balance due on requisition of October, 1782 2, 000,000 00 III. Revenue measures recommended : Since these balances remained due on the former requi- sitions, it was recommended that the expenses of 1784 be met by calling on the States for a part of the taxes already due. The committee proposed that 14,577,591 should be called for immediately. This would leave nearly $900,000 of the estimated expenses unprovided for; and it was sug- gested that this deficiency might be met by calling on those States that were better able to pay more than their quotas assigned under the requisition, assuring them that any such surplus payments would be placed to their credit with interest. Since, moreover, a part of the money required was to be used for payment of domestic 1 Sparks, Diplomatic Correspondence, XII. 468-478. 2 Journal of Congress, April 5, 1784. 250 BULLETIN or THE UNIVERSITY OF WISCONSIN. interest, it was recommended that one-fourth of the requi- sition should be made payable in indents, or the certificates issued by the loan officers for the interest on the domestic debt. Manifestly, this expedient would bring into the treasury no additional money income; but it would lessen the arrearages of interest, and would make it easier for the States to comply with the requisition. Singularly enough, these estimates make no mention of foreign loans as possible resources for the year ; although at about this time John Adams was endeavoring to secure a loan in Holland.' In the committee's report there is an admission that the requisitions of former years had been excessive in amount, and beyond the ability of the States. The committee, then, was wise in limiting the requi- sition to the financial ability of the States ; but the recom- mendation that the deficiency still unprovided for should be made up by voluntary advances from the richer States, was, in the light of past experience, extremely weak and inadequate. Although the fourth month of the year was passing. Con- gress delayed the consideration of these estimates for some time. A motion was made to refer the estimates to the Superintendent of Finance for his consideration,'' but this was lost. We have, however, two letters ^ that Morris wrote to the President of Congress and one of the other members on this subject, in the previous month, while the grand committee was preparing the estimates. Finally, on April 27 and 28, definite action was taken, and the expenditures were placed at the following figures: For ordinary service of government.. Sp457,525 33* For interest on foreign debt 384,254 00 For interest on domestic debt 1,970,760 00' For arrears on service of 1782, 1783.. 1,000,000 00 113,812,539 33 I Bayley, History of the National Loans, 311, 312. " April 5. = Sparks, Diplomatic Correspondence, XII. 478-484. * As estimated by the committee. 6 This omits provision for interest for the current year. BULLOCK— FINANCES OF THE UNITED STATES, 1775-89. 251 The states were then required to pay during the year *2, 670, 987. 89 on the balance due on former requisitions one-fourth of this sum being made payable in indents' For the deficiency of more than $1,100,000 no provision was made. In these tardy and inadequate budgetary measures we have a reflection of the changed position and character of Congress at this time.' The war actually over, need for the existence of a general government became less ap- parent; and the influence and authority of Congress natur- ally declined. Feeble as that body had been during its entire history, it now more nearly approached complete impotency. This popular indifference and even hostility gradually reacted upon the composition and character of Congress, and long delayed and inadequate budgetary legislation was the result. For this the unreasonable timidity and incorrigible selfishness of the States were re- sponsible. The financial measures of the next four years are con- cerned with the attempts of Congress to adjust the public accounts, provide for the redemption of the debt, and secure the revenues necessary to defray the ordinary ex- penses of government. The accounts awaiting settle- ment were enormous in number and confused beyond all conception. Morris had already taken in hand this task, and numerous acts were passed providing for the adjust- ment of these accounts. '^ By 1788 some progress had been made in the work of liquidating the public debt. Congress attempted to provide not only for the interest, but also for the principal of the debt. The receipts from the sales of the lands ceded by the States were set aside as a fund for the ultimate redemption of the princi- pal. When it finally became evident that the right to levy federal imposts would not be granted to Congress, in accordance with its request of 1788, a final efl:ort was made iMcMaster, 1, 130-139; Fiske, Critical Period, chap. iii. 2 See Bolles. I. 338-340. 252 BULLETIN OP THE UNIA'EKSITY OP WISCONSIN. to secure such a power.' This failing. Congress gave up all attempt to redeem the principal of the debt. In 1787 installments of the foreign debt became due/ but these had to remain unpaid until after 1789 ; while the interest on the Spanish and French loans fell into arrears. Interest pay- ments were continued in the case of the Dutch debt by- contracting further loans which were applied to that pur- pose. = The financial weakness of the government appears all the more clearly when we come to the history of the budget during the last years of the Confederation. The weakness of the requisition system, although manifest from the very start, was admitted by Congress in a very practical way, when in 1784 it called for the balance already due from the States,, instead of laying a new requisition. Some of the States had contributed much more than others; ' and, under such conditions, naturally objected to making further pay- ments.^ There was constant difficulty in securing an ap- portionment of the quotas, and no final adjustment of this question was secured until after 1789. Meanwhile the sums paid on tne requisitions were considered as loans from the States. In earlier chapters these subjects have been discussed more at length, and it has been shown how partially the financial demands of Congress were complied with. In the manner of forming and voting the annual budgets we notice no important change from the procedure of the earlier period. In 1785 the estimates were prepared by a grand committee, but after that year this work was given over to the Board of Treasury, then at the head of the finance department. In 1787 and 1788 the reports of the Board were submitted to special committees before they were coasidered by Congress. The budgets were no longer 1 February, 178li. ' ' = Journal of Congress, Feb. 15, 1786; State Papers, Finance, 1.26, 27. = Bayley, National Loans, 313 at seq. * See Journal of Congress, Feb. 3, 1786. = Journal of Congress, Sept. 8, 1785. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 253 formed in advance of the years to which they were to ap- ply ; and each year this work was longer delayed. In 1785 the budget was not finally adopted until September 27; in 1786 final action was delayed until August 2 ; in 1787 until October 11 ; and in 1788 until August 20. This fact of de- lay is significant of the difficulties under which Congress labored. In other particulars few changes occurred. Congress continued to pass upon private claims,' and to make a few special appropriations outside of the annual budget.' Even in the annual acts, appropriations were authorized in the m.ost loose and general form; and the same latitude was given to executive ofiicials that existed in earlier days. Only a portion of the European expenses was in- cluded in the budgets. The payments of interest on the Dutch debt were made out of funds raised in Europe by loans, and only a small part of the salaries of foreign officials was paid out of the treasury.^ In this respect budgetary unity was seriously impaired; but, since these foreign expenses were not met by requisitions, there did not exist here the same demand for careful adjustment that we have found in the case of the money expended at home In the report of September 30, 1788, we have a statement of the foreign transactions of the government. 1 Journal of Congress, May 6, 1784; Sept. 29, 1785; July B, 1786. = Journal of Congress, June 3, 1784; Oct. 20, 1786; Oct. 3, 1787. = See pp. 184, 183. 254 BULLETIN OF THE UNIVEESITY OF WISCONSIN. CHAPTER IV. COKTROL OP THE FINANCES. BIBLIOGRAPHY. Adams, Control of the Purse in the United States; Bastable, Public Finance; BoUes, Financial History of the United States, I. ; Cohn, Finanzwissenschaft; Goodnow, Comparative Administra- tive Low; Guggenheimer, Development of the Executive Depart- ments; Journals of Congress, 1775-1788; Gilpin, Madison Papers ; Parnell, Financial Reform; Stein, Finanzvnssenschaft; Sumner, The Financier and the Finances of the American Revolution; Roscher, Finanzwissenschaft ; Wagner, Finanzwissenschaft, I. Our view of the finances ol the United States at this period can be completed by a consideration of the attempts made by Congress to develop methods of financial control. Such a control is a necessary condition of any well ordered administration of a state's finances, and its exercise under the old Confederation lay almost wholly with the Conti- nental Congress. As we have seen, control of financial administration con- sists in imposing effective checks on the collection and ex- penditure of money and in a thorough investigation into the application of all public funds. The exercise of such a control may in part lie with the executive and judicial de- partments, as well as with the legislative.^ But it has been found that, if the legislature is to have the most ef- fective direction of financial matters, it must perform a large part of the work of controlling the administration. Otherwise, the best methods of budgetary procedure may 1 See Goodnow, II. 140-143. BULLOCK — FINANCES OP THE UNITED STATES, 1775-89. 255 Ml to secure a strict application of public moneys in ac- cordance with the intention of the legislature.' Since the Continental Congress united in itself both legislative and executive authority, the problem of the control of the financial administration presented itself in a peculiar form. Congress had to deal, not with an execu- tive department co-ordinate with itself, but merely with its own servants employed in performing the routine work of the treasury, and with the committees selected from its own members for the purpose of superintending the financial transactions of the government. Thus it Jay in the power of Congress to make its control over the admin- istration as absolute as possible, but an ignorance of the proper methods to be employed prevented the accomplish- ment of this end. This result is in no way surprising. The lack of previ- ous experience would not justify the expectation that Con- gress would devise means of securing an economical ap- plication of the large sums devoted to war expenditure, a task which is, under the best circumstances, attended with extreme difficulty. At this time, moreover, methods of con- trol were very imperfectly developed in older countries. Even in England, where legislative direction of taxation and appropriations had been most firmly established. Par- liament had devised only a very imperfect system of con- trolling the issues of public money from the Exchequer." From the very incomplete material which is available the following steps can be traced in the development of methods of financial control. We will first consider the constitution of the department of finance. Since the business of the treasury was at first superin- tended by the Committee on the Treasury and the Treasury Board, both of which were composed of members of Con- 1 On tlie general subject of financial control see, Rosoiier, Finanzwissenscliaft, sees 154, 155; Bastable, 668-672; Wagner, Finanzwissenchaft, L 30]-3i4; Cohn. sec. 172; Goodnow, II. 263-295; Stein, L 425-439, II. 64-69. 2 Bastable, Public Finance, 668-669; Parnell, Financial Reform, chap. 11. 256 BULLETIN OF THE UNIVERSITY OF WISCONSIN. gress, that body had constant communication "with the heads of the finance department; and no question of fur- ther control presented itself. In the Board of Treasury appointed in 1779, there were, besides two members of Congress, three commissioners who were not members of that body.^ In 1781,^ when a Superintendent was placed at the head of the department, the question of control became a real one ; but Congress did nothing more than to prescribe with considerable minuteness the duties and powers of this official. With the establishment of the new Board of Treasury in 1784,^ Congress provided that none of its mem- bers should engage in "any trade or commerce whatsoever, " a provision that has been incorporated in our present laws regulating the Department of the Treasury. This is as far as Congress felt obliged to go in the direction of placing formal restrictions on the head of the finance depart- ment. "We shall see, however, that there existed other methods of control. The subordinate offtcers of the treasury were required to take an oath to perform faithfully the duties attaching to their positions, and could be removed by Congress ; or, in some cases, could be suspended by the heads of the de- partment.' The "Continental Treasurers" appointed in 1775 ' were required to give bonds in the sum of one hundred thousand dollars for the faithful performance of their ofiice. But it does not appear that this was required of subsequent treasurers, or of other treasury officials. Until the time of Morris, the heads of the department did not have full con- trol over these subordinate officers. This division of authority between Congress and the five members of the Board of Treasury rendered it impossible to fix responsi- bility, and to secure an effective supervision over the operations of the treasury. 1 Journal of Congress, July 30, 1779. 2 Journal of Congress, Feb. 7, 1T81. s May 27, 1784. " See resolve of July 29, 1779. 5 July 29. BULLOCK— FINANCES OF THE UNITED STATES, 1775-89. 257 A second point of importance is the matter of public ac- counting and financial reports. We have already seen that, up to the time of Morris, the accounts of the treas- ury were confused; and were never punctually settled. The facts that Hamilton was obliged to estimate in round numbers the expenditures for 1780, and that many public officials refused to furnish any accounts of money en- trusted to them, are significant of the confusion that must have existed. At the same time, there was, for many years, no regular system of finance reports. Congress from time to time called upon the treasury officials for in- formation, and also had continually in its presence the members of the Treasury Board. But it was 1781* before an attempt was. made to secure regular statements of the receipts of the government. With poor accounting and an absence of regular reports, it was, manifestly, impossi- ble for Congress to exercise an effective control. We must remember, however, that, at this time, the advantages of publicity in financial transactions had not been generally recognized in most European countries;^ and that the course of Congress in this matter is, therefore, less sur- prising. When Morris became Superintendent of Finance, he in- tended to publish quarterly reports of receipts and ex- penditures.^ His experience had already taught him the necessity of such publicity. But the desperate condition of the treasury at the end of certain quarters led him to postpone until 1785 the publication of his quarterly state- ments, which we have in the Report of 1785. He did, how- ever, secure a prompt settlement of public accounts; and furnished Congress and the States with frequent reports on financial matters. After his time publicity was to a large extent secured in all financial transactions. Yet, in the Federal Convention of 178 7 there existed a feel- 1 Journal of Congress, Feb. 9, 1781. 2 SeeEosoher, Finanzwissenschaft, sec. 5; Bastable, 643, 643. s See Sumner, Financier, II. ISo; Robert Morris, 114, 115. 258 BULLETIN OP THE UNIVEKSITY OF WISCONSIN. ing that, while it is necessary to have regular reports of the public expenditures, still "many operations of fi- nance can not be properly published at certain times. "' Even after 1789 the House of Representatives had to en- gage in a determined struggle with the Treasury Depart- ment before it established its right to have laid before it at all times full information concerning the condition of the finances.' The public accounting was vastly improved by Morris; and, after his resignation, it was not allowed to fall into the confusion that had previously characterized it. In the Report of 1790 we have the accounts of the govern- ment from February 20, 1781, to September 12, 1789, when Hamilton assumed the management of the Treasury De- partment. A third matter of the greatest importance in any system of financial control is that of checks on collection and issue. The weakness of the methods adopted in collecting the revenues of the government has been discussed in another ■ place. ^ The loan office receivers, who acted also as receiv- ers of taxes, were not under definite legal restrictions un- til 1785 ; while the system of Continental receivers of taxes was of short duration. An adequate system of checks over the issue of public moneys was not established in the treas- ury itself until 1778, ' while large sums were placed in the hands of individuals and committees and expended by them. In many such cases, we have seen that no accounts were ever rendered of such expenditures. In this matter Morris instituted sonie of his most important reforms. But Congress had little control over the actual objects of expenditure, owing to the fact that it did not make ap- propriation bills sufficiently specific. In an earlier chapter we have had occasion to consider more at length the gen- eral character of the appropriations at this time. Suffice 1 See Madison Papers, 1680, 1581. = See Adams, Control of the Purse in tlie United States, 185-187. ' See pp. 191, 192. ■■Seep. 194. BITLLOOK— WNANOES OF THE UNITED STATES, 1775-89. 259 itto say at this point, that, in spite of all systems of checks and balances between the different treasury officials who had charge of the issue of public money, there was a constant diversion and transfer of funds from the objects of expenditure contemplated in the original appropriations. We have seen that Morris alone of the heads of the depart- ment felt the evils attending such proceedings.^ In 1788^ a committee of Congress reported that large sums had been paid out of the treasury, -of which no appropriation is to be found on the public journals of Congress. Several of them remain to be accounted for. " There was still a fourth method by which Congress at- tempted to strengthen its control over the finances. This was the commonly employed system of investigations by congressional committees. This had been a favorite ex- pedient with Congress from the earliest years of the war, and the method came to be generally applied to all the ex- ecutive departments. In an earlier chapter' we have con- sidered the Standing Committee of Finance, which was ap- pointed in 1778, "to consider the state of the money and finances of the United States, and report thereon from time to time." This committee presented frequent reports, and through it Congress gained a direct oversight of the opera- tions of the treasury. In 1780 and 1781 there were insti- tuted those sweeping investigations of the finance depart- ment, to which we have already referred.* Thus was in- augurated another method of obtaining a more vigorous supervision of the finances. It remains to speak of the methods of auditing the pub- lic accounts. Manifestly, without an effective system of audit, all other attempts to control financial administration must prove futile. A step was made in this direction when Congress instructed the first Committee on the Treasury 1 See p. 804. " Journal of Congress, Sept. 30. 3 See p. 193, ■• See p. 196. 260 BULLETIN OF THE UNIVERSITY Or WISCONSIN. to examine the accounts of the treasurers, to employ per- sons to keep the public accounts, and to report the state of such accounts to Congress from time to time.' At nearly the same ^ date it was required that all committees and individuals who had had public money placed in their hands should "lay before Congress an account of the ex- penditure of the same." As we have already seen, such accounts were in many cases never rendered. When the treasury establishment was remodeled in 1778' a more elaborate system of audit was introduced; and in the re-organizatibn during the following year * the methods were improved and simplified. In 1781 " further changes were made, and the procedure within the treasury department was given the form which it retained until the end of the Confederation. In the earlier years of its history Congress seems to have taken no regular part in the work of auditing the accounts of the treasury officials. We have seen, however, that through investigating committees some oversight of the affairs of the department was secured. This was increased when committees were regularly appointed to prepare esti- mates of the annual expenditures, a subject which we have considered in the last chapter. But it is evident that Congress did not appreciate the importance of a separ- ate examination of the accounts of public officials by legis- lative committees. This was done where dishonesty was suspected, as in the case of Deane. But Franklin was un- able to secure a settlement of his affairs, = and Morris did not secure a final settlement of his accounts as Financier until after 1789.' Congress, did, it is true, investigate the administration of Morris in 1783.' But Morris's report of 1 February 17, 1776. "^ = January 5, 1776. s September 36. ' July 30. ° September II. « See p. 197. ' See Sumner, Financier, II. 203-311. » June 17, 1783. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 261 the receipts and expenditures was not submitted until 1785,* and the commissioners appointed to examine it seem to have rendered no report. In 1788,^ a congressional com- mittee brought in a report of the receipts and expendi- tures from 1784 to 1788. This seems to have been the first step toward any system of congressional audit. Such methods, indeed, were not in use in England until after 1832 ; and it was twenty years after the adoption of the present Constitution that the Committee on Public Ex- penditure was appointed in our own House of Representa- tives.^ Thus the lack of an adequate system of audit in- tensified all the other weaknesses in the control of the finances. 1 Eeport ot 1785. 2 September 30. 3 See Bastable, Public FiDance, 070-671. 262 BULLETIN OF THE UNIVEESITY OP WISCONSIN. CONCLUSION. The results of the financial development of the United States during the period covered by this essay are of the greatest importance for the later history of our national finances. We have been treating of a time of transition, during which thirteen comparatively isolated colonies en- tered into an intermediate stage of loose political connec- tion, and finally completed an enduring federal union. In the national finances we find a series of tentative experi- ments that demonstrated the necessity of a substantial system of federal finance, and paved the way for its estab- lishment. During these years the United States is found repeating the experience of similar confederations, and furnishing an interesting illustration of the financial weak- ness of such associations of states. But the old Confederation served as something more than a horrible example for the profit of its successor. To the new government the old Congress bequeathed a very substantial part of its financial methods, so that the year 1789 marks no sharp break from the procedure of the earlier formative period. A brief summary will show the importance of the positive contributions derived from the time of the Confederation. It will also appear that these years are characterized by a gradual transition and contin- uous development from the primitive methods of colonial days to the completed system of federal finance. The Continental bills of credit did something more than serve as an example of the evils of an irredeemable paper currency. The colonies in 1775 were unused to heavy and continued taxation, and unwilling that any central author- BULLOCK—FINANCES OP THE UNITED STATES, 1775-89. 263 ity Should attempt to tax them. The bills of credit to- gether with the foreign loans, bridged over the years that had to intervene before the political unripeness of colonial times could be replaced by a willingness to incur sacrifices for the general good. The weakness and disorders of the Confederation finally showed the necessity of taxation directly by the general government, and led the Federal Convention to confer this power upon the Congress of the new Constitution. But this is not all. The subsequent forms of federal taxation were greatly influenced by the experience of these earlier years. The difficulty which the Continental Congress encountered in apportioning quotas of taxes directly among the States, led to a feeling that indirect taxes were the form best suited to the use of the general government. These taxes rendered an apportion- ment unnecessary, while, at the same time, it was thought that they were less felt and less odious than any others. Furthermore, customs duties were preferred to excise, as less inquisitorial and "most compatible with the genius and and policy of free states. "' Besides the paper money, the earliest years of the Eevo- lution saw still anothev development of public credit. Domestic and foreign loans, of a size unprecedented in previous colonial history, helped to meet the extraordinary war expenditures; and to fill the gaps caused by an un- willingness to submit to the needed taxation. The prac- tical repudiation of the paper money, and constant arrear- ages in the payment of interest and principal of the public loans served to impair the nation's credit. This was due, however, to the weakness and not to any intentional dis- honesty of the government. The Confederation was unable to provide for the extinguishment of the mass of war jn- debtedness, and turned this burden over to the new gov- ernment. But long before 1789 Congress sought to es- 1 See address to the States in Journal of Congress, April 24, 178.3. Also see the discus- sions of taxation in Ttie Federalist. 264 BULLETIN OF THE UNIVERSITY OF WISCONSIN. tablish funds that should be permanently applied to sink- ing the public debt. Thus only the details, not the princi- ples, of the funding act of 1790 contained anything new to our financial procedure. Moreover, the pledging of rev- enues for the payment of public debts antedates the Confed- eration, and can be found in the financial history of the colonies.' Turning to the administration of the finances we have found that jealousy of executive authority, especially, in this field, long delayed the establishment of an effective department of finance. Prom this source arose disorders that nearly proved fatal to the success of the Revolution, and that finally demonstrated the necessity of unified man- agement in this department. Congress at last gave the treasury a single head, and thus developed the principle that was incorporated into the law of 1789 that established our present Treasury Department. Furthermore, many of the details of that act merely continued the procedure of earlier years ; while it was, as a whole, based upon the ex- perience of the times of the Confederation. In budgetary methods Congress seems to have followed the loosest form of procedure until the development of the requisition system necessitated a more exact adjust- ment of revenue to supply. Up to this time little seems to have been gained from the previous experience of England or of the colonies. Budgetary unity was finally established, but rather as a result of the jealousy of the States than through an appreciation of the inherent advantages of for- mal unity. That this was the case will appear from the readiness with which the revenue and expense sides of the budget were separated when indirect taxation was inaugu- rated by the First Congress in 1789. Financial control was, during the entire period, of the most rudimentary character; and this, too, in spite of the fact that Congress united in itself both legislative and ex- 1 See p. 316. BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 265 ecutive authority. Bat of all forms of modern financial pro- cedure, effective methods of legislative control have been the latest to develop. They did not exist in England dur- ing the time of our Revolution, and in this country their development has largely been the vrork of the present century. 266 BULLETIN OF THE UNIVERSITY OF WISCONSIN. GENERAL BIBLIOGRAPHY. (A) GENERAL WORKS ON FINANCE, HISTORY, AND PUBLIC LAW. Adams, H. C. Public Debts. (New York, 1892.) Bastable, C. F. Public Finance. (London and New York, 1892.) Blackstone, Sir William. Commentaries on tlie Laws of England. Buxton, S. C. " Budget," in Palgrave's Dictionary of Political Econ- omy. (London and New York, 1891.) Cohn, Gustav. System der Finanzwissenschaft. (Stuttgart, 1889.) Czoernig, Carl. Darstellung der Einrichtungen uber Budget. (Wien, 1866.) Dowell, Stephen. History of Taxes and Taxation in England. (Lon- don, 1888.) Gneist, Rudolph. Englisches Verwaltungsrecht. (Dritte Auflage, 1883.) Gneist, Rudolph. The History of the English Constitution. (New York, 1886.) Goodnow, F. J. Comparative Administrative Law. (New York, 1893.) Jellinek, Georg. " Budgetrecht," in HandwOrterbuoh der Staatswis- senschaften. (Jena, 1890-1893.) Jellinek, Georg. Die Lehre von den Staatenverbindungen. (Wien, 1882.) Leroy Beaulieu, Paul. Traite de la Science des Finances. (Cinquieme edition, Paris, 1892.) Macaulay, T. B. History of England from the Accession of James II. May, T. E. The Constitutional History of England. (London, IS&l.) May, T. E. Treatise on the Law, Privileges, Proceedings, and Usage of Parliament. (Tenth edition, London, 1893.) Parnell, Sir Henry. Financial Reform. (Second edition, London, 1830.) Proceedings of the Cobden Club. " Correspondence Relating to the Budgets of Various Countries " (London, 1874.) Schanz, Georg. " Budget," in HandwOrterbuch der Staatswissenschaften, (Jena, 1890-1893.) Schonberg, Gustav. Finanzwissenschaft und Verwaltungslehre. Drit- ter Band, Handbuch der Politischen Oekouomie. (Dritte Auflage Tubingen, 1891.) Spofiford. " Budget," in Lalor's Cyclopaedia of Political Science. (Chi- cago, 1882.) BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 267 Stein, Lorenz. Lehrbuch der Pinanzwissenschaft. (Ftinfte Auflage Leipzig, 1885.) Stourm, Rene. Le Budget. (Deuxieme edition, Paris, 1891.) Stubbs, William. Constitutional History of England. (Fourth edition. Oxford, 1883-1890.) Todd, Alpheus. Parliamentary Government in England. (Second edi- tion, London, 1887.) Umpf enbaoh, Karl. Lshrbuch der Finanzwissensciiaft. (Zweite Auf- lage, Stuttgart, 1887.) United States Consular Reports. No. 90. March, 1888. " Budgets and Budget Legislation in Foreign Countries." Wagner, Adolph. Finanzwissenschaft. (Dritte Auflage, Leipzig und Heidelberg, 1883.) Wilson, A. J. The National Budget. (London, 1882.) Wilson, Woodrow. Congressional Government. (Ninth edition, Bos- ton and New York, 1892.) (B) WORKS ON THE FINANCES OF THE UNITED STATES PROM 1775 TO 1789. Adams, E. D. The Control of the Purse in the United States. Kansas University Quarterly. (Lawrence, Kansas, April, 1894.) Adams, H. B. Maryland's Influence upon Land Cessions to the United States. Johns Hopkins University Studies in Historical and Polit- ical Science. Third Series. Adams, John. Works. (Boston, 1850-56.) American Almanac, 1830. (Published by Gray and Brown, Boston.) American Archives. (Fifth series, Washington, 1837-1853.) American State Papers, Finance. (Washington, 1832-1859.) Bancroft, George. History of the United States of America. (Author's last revision. New York, 1891.) Banker's Magazine, February, 1860, Vol. XIV. (New York, 1860.) Barrett, J. A. Evolution of the Ordinance of 1787. University of Ne- braska Seminary Papers. (New York, April, 1891.) Bay ley, Rafael. History of the National Loans of the United States. Tenth Census, Vol. VII. (Washington, 1884.) Belles, A. S. Financial History of the United States. (New York, 1884.) Breck, Samuel. Historical Sketch of Continental Paper Money. Part I. in Proceedings of the American Philosophical Society, Vol. I., (Philadelphia, 1840.) Part II. in Proceedings, Vol. III. (Philadelphia, 1843.) 268 BULLETIN OP THE UNIVERSITY OF WISCONSIN. Bronson, Henry. A Historical Account of Conneoticut Currency, Con- tinental Money, and the Finances of the American Revolution. In Papers of New Haven Historical Society, Vol. I. (New Haven, 1865.) Circourt, Adolphe de. Histoire de 1' Action Commune de la Prance et de r Amerique pour 1' Independence des Etats Unis. (Paris, 1876.) Cooley, T. M. The General Principles of Constitutional Law in the United States of America. (First edition, Boston, 1880. Second edi- tion, Boston, 1891.) Curtis, G. T. History of the Constitution of the United States. (New York, 1865.) Doniol, Henri. Histoire de la Participation de la France a 1' Etablisse- ment des Etats Unis d' Amerique. (Paris, 1886.) Donaldson, Thomas. The Public Domain. (Washington, 1884.) Durand, John. New Materials for the History of the American Revolu- tion. (New York, 1889.) Elliot, Jonathan. Debates in the State Conventions on the Adoption of the Federal Constitution, together with the Journal of the Federal Convention. (Second edition, Washington, 1854.) Elliot, Jonathan. Debates on the Adoption of the Federal Con- stitution in the Convention Held at Philadelphia, with a Diary of the Debates of the Congress of the Confederation. (Washington, 1845. Elliot, Jonathan. The Funding System of the United States and Great Britain. (Washington, 1845. Vol. II. Executive Documents, XXVin. Congress, 1st Session.) Ely, R. T. Taxation in American States and Cities. (New York, 1888.) Fiske, John. The Critical Period of American History. (Tenth edition Boston and New York, 1892.) Ford, P. ti. Bibliography of Publications of the Continental Congress. In Boston Public Library Bulletins, VIII., IX., X. Franklin, Benjamin. The Works of Benjamin Franklin. Edited by Jared Sparks. (Boston, 1856.) Gallatin, Albert. The Writings of Albert Gallatin. Edited by Henry Adams. (Philadelphia, 1879.) Gay, S. H. James Madison. (Boston and New York, 1884.) Gilpin, H. D. The Papers of James Madison. Edited by H. D. Gilpin. (Washington, 1840.) Gouge, W. E. A Short History of Paper Money and Banking in the United States. (New York, 1840.) Greene, G. W. Historical Review of the American Revolution. (Boston, 1865.) Greene, G. W. "Finances of the Revolution." In Atlantic Monthly, XIV. (Boston, 1864.) BFLLOCK — FINANCES OF THE UNITED STATES, 1775-89 269 Guggenheimer, J. 0. The Development of the Executive Departments, 1775-1789. In Essays in the Constitutional History of the United States. Edited by J. F. Jameson. (Boston and New York, 1889.) Hale, E. E. Franklin in France. (Boston, 1887.) Hamilton, J. C. The History of the Republic of the United States, as Traced in the Writings of Alexander Hamilton. (Philadelphia, 1861.) Hamilton, Alexander. The Works of Hamilton. Edited by J. C. Ham- ilton. (New York, 1850.) Hildreth, Richard. The History of the United States of America. (New York, 1854.) Hill, William. The First Stages of the Tariff Policy of the United States. Publications of the American Economic Association. (Baltimore, 1893. Historical Magazine, Vol. VI. (New York, 1862.) Hock, 0. F. Die Finanzen und die Finanzgeschichfce der Vereinigten Staaten von Amerika. (Stuttgart, 1867.) Jahrbucher fiir Nationalokonomie und Statistik. (Jena, 1863.) James, E. J. Some Considerations on the Legal Tender Decisions. American Economic Association Publications. (Baltimore, 1889.) Jeflferson, Thomas. The Writings of Thomas Jefferson. Edited by H. A. Washington. (Washington, 1854.) Journals of Congress, 1775-1788. (Philadelphia.) Kapp, Friederioh. The Life of Kalb. (New York, 1884.) Knox, J. J. United States Notes. (New York, 1885.) Lalor, J. J. Cyclopaedia of Political Science and Political Economy. (Chicago, 1882.) Landon, J. S. The Constitutional History and Government of the United States. (Boston, 1889.) Lecky, "W. E. H. A History of England in the Eighteenth Century. (American edition. New York, 1882.) Lewis, L. History of the Bank of North America. (Philadelphia, 1882.) Lodge, H. C. Alexander Hamilton. (Boston and New York, 1882.) McMaster, J. B. A History of the People of the United States. (New York, 1891.) Miller, S. F. Lectures on the Constitution of the United States. (New York and Albany, 1891.) Morse, J. T. Benjamin Franklin. (Boston and New York, 1889.) Morse, J. T. The Life of Alexander Hamilton. (Boston, 1876.) Phillips, Henry. Historical Sketch of the Paper Currency of the Amer- ican Colonies. (Roxbury, Mass., 1865. Printed for the author.) Pitkin, Timothy. A Political and Civil History of the United States. (New Haven, 1828.) 270 BULLETIN OP THE UNIVERSITY OP WISCONSIN. Poore, B. P. The Federal and State Constitutions of the United States, (Washington, 1877.) Proceedings of the Massachusetts Historical Society, 1862. (Boston, 1862.) Ramsay, David. History of the United States. (Second edition, Phila- delphia, 1818.) Report of 1785. A statement of accounts of the United States during the Administration of the Superintendent of Finance, from Feb- ruary 20, 1781, to November 1, 1784. (Philadelphia, 1785. ) Report of 1790. Reprinted in Bankers' Magazine, February, 1860. Vol. XIV. (New York, 1860.) Roosevelt, Theodore. Gouverneur Morris. (Boston and New York, 1888.) Ross, E. A. Sinking Funds. American Economic Association Publica- tions. (Baltimore, 1892.) Sato, S. History of the Land Question in the United States. Johns Hopkins University Studies in Historical and Political Science. Fourth Series. Schouler, James. History of the United States of America. (New York, 1880.) Schuckers, J. W. A Brief Acooant of the Finances and Paper Money of the Revolutionary War. (Philadelphia, 1874.) Secret Journals of Congress. (Boston, 1820.) Small, A. W. The Beginnings of American Nationality. Johns Hop- kins University Studies in Historical aad Political Science. Eighth Series, I-II. Sparks, Jared. The Diplomatic Correspondence of the American Revo- lution. (Boston, 1830.) Sparks, Jared. Life and Writings of Gouverneur Morris. (Boston,1832.) Sumner, W. G. A History of American Currency. (New York, 1874.) Sumner, W. G. Alexander Hamilton. (New York, 1890.) Sumner, W. G. Robert Morris. (New York, 1892.) Sumner, W. G. The Financier and the Finances of the American Re- volution. (New York, 1891.) The Federalist. Edited by Henry Cabot Lodge. (New York, 1889.) Walker, F. A. Money. (New York, 1878.) Webster, Pelatiah. Political Essays on the Nature and Operation of Money, Public Finance, and Other Subjects. (Philadelphia, 1791.) Wharton, Francis. The Revolutionary Diplomatic Correspondence of the United States. (Washington, 1889.) Winsor, J. Narrative and Critical History of America. (Boston and New York, 1889.) BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 271 (C) WORKS ON THE FINANCES OF THE AMERICAN COLONIES. Adams, E. D. The Control of the Purse in the United States. Kansas University Quarterly, April, 1894. (Lawrence, Kansas, 1891.) American State Papers, Finance, Vol. I. See Report on Direct Taxes, 1796, pp. Ill et seq. (Washington, 1832.) Archives of the State of New Jersey. First Series. (Newark and Tren- ton, 1881-1893.) Arnold, S. G. History of the State of Rhode Island. (New York, 1859- 1860.) Austin, G. L. The History of Massachusetts. (Boston, 1876.) Bancroft, George. History of the United States of America. (Author's last revision. New York, 1891.) Barry, J. S. The History of Massachusetts in the Colonial Period. (Boston, 1855-1857.) Basset, J. S. The Constitutional Beginnings of North Carolina. Johns Hopkins University Studies in Historical and Political Science, Twelfth Series, II. Belknap, Jeremy. The History of New Hampshire. (Boston, 1792.) BoUes, A. S. " American Finance," in Lalor's Cyclopaedia of Political Science. (Chicago, 1882.) Bronson, Henry. Historical Account of Connecticut Currency, Conti- nental Paper Money, and the Finances of the Revolution. Papers of New Haven Historical Society, Vol. I. (New Haven, 1865.) Browne, W. H. Maryland. (Boston and New York, 1884.) Crowell, J. F. Taxation in the Colony of New Jersey. Trinity Col- lege Publications, VI. (Durham, N. C, 1893.) Douglass, William. Summary of the British Settlements in North Amer- ica. (Boston and London, 1755.) Douglas, C. H. J. The Financial History of Massachusetts. Columbia College Studies in History, Economics, and Public Law. (New York, 1892.) Doyle, J. A. English Colonies in America. (New York, 1889.) Ely, R. T. Taxation in American States and Cities. (New York, 1888.) Pelt, J. B. An Historical Account of Massachusetts Currency. (Bos- ton, 1839.) Felt, J. B. Statistics of Taxation in Massachusetts. In Collections of the American Statistical Association, Vol. I. Part III. (Boston, 1847.) Piske, John. The American Revolution. (Boston and New York 1891.) 272 BULLETIN OP THE UNIVERSITY OP ■\VISCONSIN. Franklin, Benjamin. An Historical Account of the Constitution and Government of Pennsylvania. (London, 1759.) For the disputed question of the authorship of this work, see, Ford's Franklin Bibli- ography, 110-111; Sabin's Bibliotheca Americana, VII. 13. Prothingham, Eichard. The Rise of the Republic of the United States. (Boston, 1886.) Gordon, T. F. History of Pennsylvania to 1775. (Philadelphia, 1829.) Hening, W. H. Statutes at Large, a Collection of all the Laws of Vir- ginia. (Richmond, Va.) Hickcox, J. H. A History of the Bills of Credit or Paper Money Issued by New York from 1709-1789. (Albany, 1866.) Hill, William. The First Stages of the TariflE Policy of the United States. American Economic Association Publications. (Baltimore, 1893.) Hutchinson, Thomas. The History of l he Colony of Massachusetts Bay. (London, 1760, 1768, 1828.) Johnston, Alexander. Connecticut. (Boston and New York, 1887.) Journal of the Legislative Council of the Colony of New York, 1691-1775. (Albany.) Journals of the Provincial Congress of the State of New York, 1775-1777. (Albany, 1842.) Lecky, W. E. H. History of England in the Eighteenth Century, III. chap. 12. (American edition. New York, 1878.) Lodge, H. C. A Short History of the English Colonies in America. (New York, 1881.) McMahon, J. V. L. An Historical View of the Government of Maryland. (Baltimore, 1831.) Magazine of American History, Vol. III. (New York, 1879.) Minot, G. E. Continuation of the History of the Province of Massachu- setts Bay from the Year 1748. (Boston, 1798-1803.) Minutes of the Provincial Congress of Pennsylvania. (Philadelphia 1852.) Moore, J. W. History of North Carolina. (Ealeigh, 1880.) Morey, W. C. The First State Constitutions. Annals of the American Academy of Political Science. (September, 1893.) Mulford, I. S. Civil and Political History of New Jersey. (Philadel- phia, 1851.) Phillips, Henry. Historical Account of the Paper Currency of the American Colonies. (Roxbury, Mass., 1865.) Poore, B. P. The Federal and State Constitutions of the United States. (Washington, 1877.) Proud, Eobert. The History of Pennsylvania to 1742. (Philadelphia 1797.) _ ' BULLOCK — FINANCES OF THE UNITED STATES, 1775-89. 273 # Kamsay, David. History of South Carolina. (Charleston, 1809.) Eipley, W. Z. The Financial History of Virginia. Columbia College Studies in History, Economics, and Public Law. (New York, 1893.) Roberts, E. H. New York. (Boston and New York, 1887.) Scharf, J. T. History of Delaware. (Philadelphia, 1888.) Scharf, J. T. History of Maryland. (Baltimore, 1879.) Schwab, J. C. History of the New York Property Tax. American Economic Association Publications. (Baltimore, 1890.) Smith, Samuel. History of the Colony of New Jersey. (Burlington, 1765.) Smith, William. History of New York. (Albany, 1814.) Sumner, W. G. History of American Currency. (New York, 1876.) The Acts and Resolves of the Province of Massachusetts Bay. (Boston, 1869-1886.) The General Laws of Massachusetts. (Boston, 1823.) The Laws of the Colony of New York, 1774-1775. (Albany, 1888.) The Laws of New York, 1691-1773. (New York, 1774.) The Laws of the State of New York. Vol. I. (New York, 1789.) The Laws of the Commonwealth of Pennsylvania, 1700-1781. (Philadel- phia, 1810.) The Public Records of the Colony of Connecticut. (Hartford, 1850-1890.) Trumbull, Benjamin. A Complete History of Connecticut, 1630-1 764. (New Haven, 1818.) Whitney, E. L. The Government of the Colony of South Carolina. Johns Hopkins University Studies in Historical and Political Science. Thirteenth Series, I-II. Williamson, Hugh. The History of North Carolina. (Philadelphia, 1812.) Woodburn, J. A. The Causes of the American Revolution. Johns Hopkins University Studies in Historical and Political Science. Tenth Series. BULLETIN OF THE UNIVERSITY OF WISCONSIN. EooNOMios, Political Soibnoe, and History Sbbies, Volume 1: No. 1. The Geographical Distribution of the Vote of the Thirteen States on the Federal Constitution, 1787-8, by Orin Grant Libby, A. M., Fellow in History, with an introduction by Frederick J. Turner. Pp. 116, pis. 2, July, 1894. Price 75 cents. No. 2. The Finances of the United States from 1775 to 1789, with Especial Reference to the Budget, by Charles J. Bullock, A. B., Fellow in Economics. Pp. 157, June, 1895. Price 75 cents. Science Series, Volume 1: No. 1. On the Speed of Liberation of Iodine in Solutions of Hydro- chloric Acid, Potassium Chlorate, and Potassium Iodide, by Herman Sohlundt, Assistant in Chemistry. Pp. 33, December, 1894. Price 35 cents. No. 2. On the Quartz Keratophyre and Associated Bocks of the North Bange of the Baraboo BlufCs, by Samuel Weidman. Pp. 21, pis. 3, January, 1895. Price 25 cents. No. 3. Studies in Spherical and Practical Astronomy, by George C. Comstock, Director of the Washburn Observatory. Pp. 50. June, 1895. Price 40 cents. No. L A Contribution to the Mineralogy of Wisconsin, by William Herbert Hobbs, Assistant Professor of Mineralogy and Petrology. With 5 plates. (In press.) ENaiNEEBiNQ Series, Volume 1: No. 1. Track, by L. F. Loree, M. Am. Soc. C. E., Special University Lecturer. Pp. 24, April, 1894. Price 25 cents. No. 2. Some Practical Hints in Dynamo Design, by Gilbert Wilkes, M. Am. Inst. E. E., Special University Lecturer. Pp. f6, May, 1894, Price 25 cents. No. 3. The Steel Construction of BuUdings, by C. T. Purdy, C. E., Special University Lecturer. Pp. 27, October, 1894. Price 25 cents. No. 4. The Evolution of a Switchboard, by A. V. Abbott, C. E., Special University Lecturer. Pp. 32, pis. 4, October, 1894. Price 35 cents. No. 5. An Experimental Study of Field Methods which will Insure to Stadia Measurements Greatly Increased Accuracy, by Leonard Sewal Smith, B. C. E., Instructor in Engineering. Pp. 45, pi. 1, May, 1895. Price 35 cents. No. 6. Railway Signalling, by W. McC. Grafton. (In preparation.) mm ^Rgisc^ The Bulletin of the Univeksity of Wisconsin is printed by the Statq and is issued at irregular intervals. It contains original papers bj^ persons connected with the university. Copies of the Bulletin will be forwarded post free from the oflBoe ofl the State Superintendent of Public Property to all colleges, high schools] normal schools, and pubUc libraries of the state which have a collectioij of 300 or more volumes, on making proper application at the Superinl tendent's ofSce. Persons who reside in the state of Wisconsin can receive copies of the Bulletin free by applying to the Secretary of th^ Board of Regents of the University and paying the cost of transporta tion. The postage required for the individual numbers thus far issued is as follows: Eng. Ser., No. 1, 2c; No. 2, 2c; No. 3, 2c; No. 4, 3c; No. 5| 4c. Hist. Ser., No. 1, 6c; No. 2, 7c. Sci. Ser., No. 1, 2c; No. 2, 2c; No. 3, 3o| All the above are sent in one package by express for 22 cents. The Bulletin may be obtained at Brentano's, 31 Union Sq., New York and 204^206 Wabash Ave., Chicago; and at A. C. McClurg & Co.'s, 117 119, and 121 Wabash Ave., Chicago. In Europe it may be obtained fron Mayer & Muller, Markgrafenstrasse 51, Berlin W., and fyom Brentano's 27 Ave de I'Opera, Paris. Communications having reference to an exchange of publicationi should be addressed to Mr. Walter M. Smith, University Librarian, ol to Professor Wm. H. Hobbs of the board of editors. !:|;->>v..v,i:,;J m V^^^f"- ■ s)^^^^- \^i^^^^^j V-. ■'-sr. , -■.- .X . >■ ^^i ^^^t. '.^' ««f>«*«ihfc?!Si