vident that George III. and his
ministers had only too good a will to reduce us again to subjection if
opportunity offered. Should we, by taxing imports, become independent in
the production of war material, a fresh struggle for life would be much
more hopeful than if we continued dependent upon foreign lands for
military supplies.

II. Funding the Debt.--In the first years after they had set up their
new constitution the people of this country staggered under a terrible
financial load. Besides the current expenses of Government, there were:
1, the federal debt due abroad, over thirteen million dollars, including
arrears; 2, the federal debt held at home, about forty-two and one-half
million; 3, the state revolutionary debts, aggregating nearly
twenty-five million. Each of these sums was largely made up of unpaid
interest.

The foreign debt Congress unanimously determined to pay in full. In
respect to the domestic federal debt two opinions prevailed. Hamilton
was for liquidating this also to the last copper. But these securities
had mostly changed hands since issue, so that dollar for dollar payment
would not advantage original holders but only speculators. As soon as
Hamilton's recommendation became public this class of paper rose from
about fifteen cents per dollar to fifty cents, and enterprising New York
firms hurried their couriers, relay horses, and swift packets to remote
parts of the Union to buy it up. Madison, supported by a strong party,
proposed, therefore, to pay only original debtors at par, allowing
secondary holders barely the highest market value previous to the
opening of the question in Congress. He was overruled, however, and this
part of the debt, too, was ordered paid according to its literal terms.

Even the motion that the United States should assume and discharge the
state debts finally prevailed, though against most violent and resolute
opposition. This came especially from Virginia, who had gone far in the
payment of her own war debt, and thought it unjust to have to help the
delinquent States. Her objection was strengthened by the fact that most
of the debt was owned in the North. The victory was secured by what is
now termed a "deal," northern votes being promised in favor of a
southern location for the national capital, in return for enough
southern votes to pass the bill assuming state debts.

These gigantic measures had origin in the mind of Hamilton. To many they
appeared and appear