Item of the Day: Alexander Hamilton’s Report on the Public Credit of the United States (1790)

Full Title: Report of the Secretary of the Treasury to the House of Representatives, Relative to a provision for the support of the public credit of the United States, in conformity to a resolution of the twenty-first day of September, 1789. Presented to the House on Thursday the 14th day of January, 1790. Published by order of the House of Representatives. New-York: Printed by Francis Childs and John Swaine, 1790.

[Alexander Hamilton, as the Secretary of the Treasury under George Washington, was faced with the responsibility of sorting out and planning the new government’s financial and economic responsibilities and policies. Although Hamilton had worked tirelessly with James Madison to have the newly drafted constitution ratified in 1787, their divergent views on finance and the economic direction in which the new United States should develop created a rift that went beyond the personal into the political, leading to the development of conflicting political ideologies and, ultimately, to the birth of opposing political parties. As Secretary of the Treasury, Hamilton had several critical economic issues to address. These included the questions of the public credit, assumption and funding. To Hamilton, the public credit of the United States was paramount to its success as a nation, and he believed that America’s prosperity and that of Great Britain were inseparable. Hamilton’s vision of the ideal economy was based on the development and encouragement of the merchant class. Opposing Madison, he argued against discrimination. The issues of assumption and of funding were other points on which Hamilton and Madison disagreed. In addition, Hamilton proposed the establishment of a national bank, the constitutionality of which was greatly debated and opposed by both James Madison and Thomas Jefferson.]

In the opinion of the Secretary, the wisdom of the House, in giving their explicit sanction to the proposition which has been stated, cannot but be applauded by all, who will seriously consider, and trace through their obvious consequences, these plain and undeniable truths.---
That exigencies are to be expected to occur, in affairs of nations, in which there will be a necessity for borrowing.—
That loans in times of public danger, especially from foreign war, are found an indispensable resource, even to the wealthiest of them.—
And that in a country, which, like this, is possessed of little active wealth, or in other words, little monied capital, the necessity for that resource, must, in such emergencies, be proportionably urgent.
And as on the one hand, the necessity for borrowing in particular emergencies cannot be doubted, so on the other, it is equally evident, that to be able to borrow upon good terms, it is essential that the credit of a nation should be well established.
For when the credit of a country is in any degree questionable, it never fails to give an extravagant premium, in one shape or another, upon all the loans it has occasion to make. Nor does the evil end here; the same disadvantage must be sustained upon whatever is to be bought on terms of future payment.
From this constant necessity of borrowing and buying dear, it is easy to conceive how immensely the expenses of a nation, in a course of time, will be augmented by an unsound state of the public credit.
To attempt to enumerate the complicated variety of mischiefs in the whole system of the social economy, which proceed from a neglect of the maxims that uphold public credit, and justify the solicitude manifested by the House on this point, would be an improper intrusion on their time and patience.
In so strong a light nevertheless do they appear to the Secretary, that on their due observance a the present critical juncture, materially depends, in his judgment , the individual and aggregate prosperity of the citizens of the United States; their relief from the embarrassments they now experience; their character as a People; the cause of good government.