Hamilton's famous report to the First Congress, as secretary of the treasury, was made at the second session in January, 1790. Near the close of the previous session a petition asking for some settlement of the public debt was received and referred to a committee of which Madison was chairman. The committee reported in favor of the petition, and the House accordingly called upon the secretary to prepare a plan "for the support of the public credit."

So far as Hamilton's funding scheme provided for that portion of the debt due to foreigners, it was accepted without demur. There could be no doubt that there the ostensible creditor was the real creditor, who should be paid in full. The report assumed that this was equally true of the domestic debt. A citizen holding a certificate of the indebtedness of the government, no matter how he came by it, nor at what price, was entitled to payment at its face value. But here the question was raised, Was this ostensible creditor the sole creditor? Was he, whose necessities had compelled him to part with the government's note of hand at a large discount when full payment was impossible, to receive nothing now when at last government was able to pay in full? Was it equity to let all the loss fall upon the original creditor, and all the gain go to him who had lost nothing originally, and had only assumed at small cost the risk of a profitable speculation? Moreover it was charged, and not denied, that in some of these speculations there had been no risk whatever; and that, so soon as the tenor of the report was known, fast-sailing vessels were dispatched from New York to the Carolinas and Georgia to buy up public securities held by persons ignorant of their recent rapid rise in value. As hitherto they had been worth only about fifteen cents on the dollar; as upon the publication of the secretary's report they had risen to fifty cents on the dollar; and as, if the secretary's advice should be taken, they would rise to a hundred cents on the dollar,—it would be securing what in the slang of the modern stock exchange is called "a good thing" to send agents into the rural districts in advance of the news to buy up government paper. "My soul rises indignant," exclaimed a member, "at the avaricious and moral turpitude which so vile a conduct displays." Nor on that point did anybody venture then to disagree with him openly.

But, besides the question as to who were in reality the public creditors, a doubt was also raised whether the debt ought to be paid in full to anybody. Every dollar of the foreign debt was for an actual dollar borrowed. But the domestic debt was not incurred to any large amount for money borrowed, but in payment for services, or for provisions and goods purchased, for which double, or more than double, prices had been exacted by those who exchanged them for government paper. If the exigencies of war had compelled the government to promise to pay for fifty bushels of wheat the price of a hundred bushels, the creditor, now that the government was in a condition to redeem its promise, was not entitled in equity to receive more than the actual value of the fifty bushels at the time of the purchase. Moreover, it was contended, there was no injustice in such a settlement of the debt, for the war had been carried on and brought to a successful end, for the benefit of the creditor as well as of everybody else. The argument was analogous in a measure to that used by a certain class of politicians in our time, who maintained that the bonds of the United States, bought at a discount for "greenbacks" during the late rebellion, should not be redeemed in gold when the war was over.

The answer to all this was obvious. The nation must first be just by paying its debts to those who could present the evidence that they were its creditors. If, when that was done, it could afford to be generous, it might, if so disposed, reimburse those who had lost by parting with the certificates of debt at a discount. The government could not in honor go behind its own contracts. The Constitution provided that "all debts and engagements, entered into before the adoption of this Constitution, shall be as valid against the United States under this Constitution as under the Confederation." Here was a debt which the Confederation had contracted, and the federal government had no more right "to impair the obligation of contracts" for its own benefit than the separate States had; and that they were expressly forbidden by the Constitution to do.

Madison listened quietly day after day to the long and earnest debates upon the subject, and then advanced an entirely new proposition. He agreed with one party in maintaining the inviolability of contracts. The Confederacy had incurred a debt to its own citizens which the new government had agreed to assume. But he also agreed with the other party that there was a question as to whom that debt was due. Were those who now held the certificates entitled to the payment of their face value, dollar for dollar, although the cost to them was only somewhere from fifteen to fifty cents on the dollar? It was true that the original contract was transferable, and these present creditors held the evidence of the transfer. But did that transfer entitle the holder to the full value without regard to the price paid for it? Was there not in equity a reserved right in the original holder, who, having given a full equivalent for the debt, had only parted with the evidence of it, under the compulsion of his own poverty, and the inability of the government at that time to meet its obligations? Was not this specially true in the case of the soldiers of the late war, to whose devotion and sacrifices the nation owed its existence?

Mr. Madison thought that an affirmative reply to the last two queries would present the true view of the case, and he proposed, therefore, to pay both classes of creditors,—those who now held the evidence of indebtedness, acquired by purchase at no matter what price; and those who had parted with that evidence without receiving the amount which the government had promised to pay for services rendered. It was not, however, to be expected that the entire debt should be paid in full to both classes. That was beyond the ability of the government. But it would be an equitable settlement, he contended, to pay the present holders the highest price the certificates had ever reached, and to award the remainder to those who were the original creditors.

This proposition received only thirteen votes out of forty-nine. Many of those opposed to it were quite ready to grant that it was hard upon the veterans of the war that they, who had received so little and who had borne so much, should not now be recognized as creditors when at last the government was able to pay its debts. But the House could not indulge in sentimental legislation. That would be to launch the ship of state upon another sea of bankruptcy. There were in the hands of the people tens of millions of paper money not worth at the current rate a cent on the dollar. If everybody who had lost was to be paid, the point would soon be reached where nobody would be paid at all. A limit must be fixed somewhere; let it be at these certificates of debt which were the evidence of a contract made between the government and its creditors. These could be paid, and they should be paid, to those who were in lawful possession of them. The law, if not the equity, of the case was clearly against Madison. That the government should be absolutely just to everybody who had ever trusted to it, and lost by it, was impossible. It was a bankrupt compelled to name its preferred creditors, and it named those whom it was in honor and law bound to take care of, and over whose claims there was, on the whole, the least shadow of doubt. That the loss should remain chiefly with the soldiers of the Revolution, and the gain fall chiefly to those who were shrewd enough, or had the means to speculate in the public funds, was a lamentable fact; but to discriminate between them was not within the right of the government. That he would have had it discriminate was creditable to Madison's heart; it was rather less creditable to his head.

Of course, underneath all this debate there lay other considerations than those merely of debtor and creditor, of moral and legal obligation, of pity for the soldiers, and of strict regard for the letter of a contract. Mr. Hamilton and his friends, it was said, were anxious to establish the public credit, not so much because they wished to keep faith with creditors as because they wished to strengthen the government and build up their own party. The reply to these accusations was, that the other side, under pretense of consideration for the soldiers and others on whom the burden of the war had borne most heavily, concealed hostility to the Constitution and a consolidated government. These were not reflections to be spoken of in debate, but they were not the less cherished, and gave to it piquancy and spirit. There was truth on both sides without doubt.

Though defeated in this measure, Madison was not less determined in his opposition to the assumption of the debts of the States. Of these debts some States had discharged more than others; and he complained, not without reason, of the injustice of compelling those which had borne their own burdens unaided to share in the obligations which others had neglected. He was unfortunate, however, in assuming a superiority for Virginia over some of the Eastern States, and especially over Massachusetts, in services rendered in the struggle for independence. The comparison provoked a call for official inquiry; and that proved that Massachusetts alone had sent more men into the field during the war than all the Southern States together. It was not much to be wondered at, when this fact was considered, that the debt of Massachusetts should be larger than that of Virginia by $800,000. The difference between Virginia and South Carolina was the same, the truth being that the war had cost Massachusetts more money to pay her soldiers for the general service, and South Carolina more to repel the enemy upon her own soil, than it had cost Virginia for either purpose. Massachusetts and South Carolina were again found acting together, simply because each of them had a debt—$4,000,000—larger than that of any other State. The total debt of all the States was about $21,000,000; and as that of North Carolina, Pennsylvania, or Connecticut, when added to the $8,000,000 of Massachusetts and South Carolina, amounted to half, or more, of the whole sum, there was no difficulty in forming a strong combination in favor of assumption. No combination, however, was strong enough to carry the measure on its own merits, notwithstanding its advocates attempted to defeat the funding of the domestic debt of the Federal Union unless the debts of the several States were assumed at the same time.

The domestic debt, however, was at length provided for, and the assumption of the debts of the States was rejected till that bargain, referred to in the preceding chapter, which gave to the Southern States the permanent seat of government, was concluded. It would not have been difficult, probably, to defeat that piece of political jobbery by a public exposure of its terms. Why Madison did not resort to it, if, as seems certain, he knew that such a bargain had been privately made, can only be conjectured. Perhaps he saw that Hamilton, who was applauded by his friends and denounced by his enemies for his clever management, had, after all, only made a temporary gain; and that Jefferson, whose defense was that Hamilton had taken advantage of his ignorance and innocence, would not, had he not been short-sighted, have made any defense at all. For the assumption of the state debts by the general government was only a distribution of a single local burden; and this was a small price for Virginia and the other Southern States to pay for the permanent possession of the federal capital.

While these questions were pending, another was thrown into the House which was not disposed of for nearly two months. The debates upon it, Madison said in one of his letters, "were shamefully indecent," though he thought the introduction of the subject into Congress injudicious. The Yearly Meeting of Friends in New York and in Pennsylvania sent a memorial against the continued toleration of the slave trade; and this was followed the next day by a petition from the Pennsylvania Society for the Promotion of the Abolition of Slavery, signed by Benjamin Franklin as president, asking for a more radical measure.

The words were probably Franklin's own, and, as he died a few weeks after they were written, they may be considered as his dying words to his countrymen,—counsel wise and merciful as his always was.

A memorable debate followed the presentation of these memorials. Even in the imperfect report of it that has come down to us, the "shameful indecency" of which Madison speaks is visible enough. Franklin, venerable in years, exalted in character, and eminent above almost all the men of the time for services to his country, was sneered at for senility and denounced as disregarding the obligations of the Constitution. But the wrath of the pro-slavery extremists was specially aroused against the Society of Friends, and was unrestrained by any considerations of either decency or truth. In this respect the debate was the precursor of every contest in Congress upon the subject that was to follow for the coming seventy years. The Quakers were the representative abolitionists of that day, and the measure of bitter and angry denunciation that was meted out to them was the same measure which, heaped up and overflowing, was poured out upon those who, in later times, took upon themselves the burden of the cause of the slave. The line of argument, the appeals to prejudice, the disregard of facts and the false conclusions, the misrepresentation of past history and the misapprehension of the future, the contempt of reason, of common sense, and common humanity, then laboriously and unscrupulously arrayed in defense of slavery, left nothing for the exercise of the ingenuity of modern orators. A single difference only between the earlier and the later time is conspicuous; the "plantation manners," as they were called five and twenty years ago, which the Wises, the Brookses, the Barksdales, and the Priors of the modern South relied upon as potent weapons of defense and assault, were unknown in the earlier Congresses.

Mr. Madison and some other members from the South, particularly those from Virginia, opposed the majority of their colleagues, who were unwilling that these memorials should be referred to a committee. "The true policy of the Southern members," Madison wrote to a friend, "was to have let the affair proceed with as little noise as possible, and to have made use of the occasion to obtain, along with an assertion of the powers of Congress, a recognition of the restraints imposed by the Constitution." This in effect was done in the end, but not till near two months had passed, within which time the more violent of the Southern members had ample opportunity to free their minds and exhaust the subject. The more these people talked the worse it was, of course, for their cause. Had Madison's moderate advice been accepted then, and had that example been followed for the next sixty or seventy years, it is quite likely that the colored race would still be in bondage in at least one half of the States. But there was never a more notable example of manifest destiny than the gradual but certain progress of the opposition to slavery; for there never was a system, any attempt to defend which showed how utterly indefensible such a system must needs be. Every argument advanced in its favor was so manifestly absurd, or so shocking to the ordinary sense of mankind, that the more it was discussed the more widespread and earnest became the opposition. Had the slaveholders been wise, they would never have opened their mouths upon the subject. But, like the man possessed of the devil, they never ceased to cry, "Let me alone!" And the more they cried, the more there were who understood where that cry came from.

In one respect Mr. Madison declared that the memorial of the Friends demanded attention. If the American flag was used to protect foreigners in carrying on the slave trade in other countries, that was a proper subject for the consideration of Congress. "If this is the case," he said, "is there any person of humanity that would not wish to prevent them?"[13] But he recognized the limitations of the Constitution in relation to the importation of slaves into the United States, and the want of any authority in the letter of the Constitution, or of any wish on the part of Congress, to interfere with slavery in the States. On these points he would have a decisive declaration, without agitation, and with as little discussion as possible, and there would have dropped the subject. It only needed, he evidently thought, that everybody, North and South, should understand the Constitution to be a mutual agreement to let slavery altogether alone, when the bargain would be on both sides faithfully adhered to.

This was all very well with the numerous persons who were quite indifferent to the subject, or who thought it very unreasonable in the blacks not to be quite willing to remain slaves a few hundred years longer. But there were two other classes to reckon with, and Mr. Madison was not much inclined to be patient with either of them. To let the subject alone was precisely what the hot-headed members from the South were incapable of doing then, as they proved to be incapable of doing for the next seventy years. On the other hand, all the petitioners could really hope for was that there should be discussion. The galleries were crowded at those earliest debates, as they continued to be crowded on all such occasions in subsequent years. Many went to learn what could be said on behalf of slavery, who came away convinced that the least said the better. Agitation might disturb the harmony of the Union, which was Madison's dread; it might lead to the death of an abolitionist, as it sometimes did in later times; but it was sure in the end to be the death of slavery, though its short-sighted defenders could never understand why. They could never be made to see that its most dangerous foes were the friends of its own household, who could not hold their tongues; that for their case all wisdom was epitomized in the vulgar caution "to lie low and keep dark;" that the exposure of the true character of slavery must needs be its destruction, and that nothing so exposed it as any attempt to defend it. Slavery was quite safe under the Constitution, as Mr. Madison intimated, if its friends would only leave it there and claim no other protection.

Advocates are never wanting in any court who believe that the most effective line of defense is to abuse the plaintiff. The Quakers, it was said, "notwithstanding their outward pretenses," had no "more virtue or religion than other people, nor perhaps so much." They had not made the Constitution, nor risked their lives and fortunes by fighting for their country. Why should they "set themselves up in such a particular manner against slavery"? Did they not know that the Bible not only allowed but commended it, "from Genesis to Revelation"? That the Saviour had permitted it? That the Apostles, in spreading Christianity, had never preached against it? That it had been—the illustration was not altogether a happy one—"no novel doctrine since the days of Cain"? The condition of these American slaves was said to be one of great happiness and comfort; yet almost in the same breath it was asserted that to excite in their minds any hope of change would lead to the most disastrous consequences, and possibly to massacre. The memorialists were bidden to remember that, even if slavery "were an evil, it was one for which there was no remedy;" for that reason the North had acquiesced in it; "a compromise was made on both sides,—we took each other, with our mutual bad habits and respective evils, for better, for worse; the Northern States adopted us with our slaves, and we adopted them with their Quakers." Without such a compromise there could have been no Union, and any interference now with slavery by the government would end in a civil war. These people were meddling with what was none of their business, and exciting the slaves to insurrection. Yet how forbearing were the people of the Southern States who, notwithstanding all this, "had not required the assistance of Congress to exterminate the Quakers!"

This was not conciliatory. Those who had been disposed at the beginning to meet the petitions with a quiet reply that the subject was out of the jurisdiction of Congress were now provoked to give them a much warmer reception. They could not listen patiently to the abuse of the Quakers, and, though they might acquiesce in the toleration of slavery, they were not inclined to have it crammed down their throats as a wise, beneficent, and consistent condition of society under a republican government. Even Madison, who at first was most anxious that nothing should be said or done to arouse agitation, while acknowledging that all citizens might rightfully appeal to Congress for a redress of what they considered grievances, was moved at last to say that the memorial of the Friends was "well worthy of consideration." While admitting that under the Constitution the slave trade could not be prohibited for twenty years, "yet," he declared, "there are a variety of ways by which it [Congress] could countenance the abolition, and regulations might be made in relation to the introduction of [slavery] into the new States to be formed out of the western territory."

Gerry was still more emphatic in the assertion of the right of interference. He boldly asserted that "flagrant acts of cruelty" were committed in carrying on the African slave trade; and, while nobody proposed to violate the Constitution, "that we have a right to regulate this business is as clear as that we have any right whatever; nor has the contrary been shown by anybody who has spoken on the occasion." Nor did he stop there. He told the slaveholders that the value of their slaves in money was only about ten million dollars, and that Congress had the right to propose "to purchase the whole of them; and their resources in the western territory might furnish them with the means." The Southern members would, perhaps, have been startled by such a proposition as this, had he not immediately added that "he did not intend to suggest a measure of this kind; he only instanced these particulars to show that Congress certainly had a right to intermeddle in the business." It is quite likely, had he pushed such a measure with his well-known zeal and determination, that it would have been at least received with a good deal of favor; and, as the admirers of Jefferson are tenacious of his fame as the author of the original Northwest Ordinance, so Gerry, had he seriously and earnestly urged the policy of using the proceeds of the sales of territorial lands to remunerate the owners of slaves for their liberation, would have left behind him a more fragrant memory than that which clings to him as a minister to France, and as the "Gerrymandering" governor of Massachusetts. The debate, however, came to an end at last with no other result than that which would have been reached at the beginning without debate, except, perhaps, that the vote in favor of the reports upon the memorials was smaller than it might have been had there been no discussion.

Within less than two years, however, Warner Mifflin of Delaware, an eminent member of the Society of Friends, who was one of the first, if not the first, of that society to manumit his own slaves, petitioned Congress to take some measure for general emancipation. The petition was entered upon the journal; but on a subsequent day a North Carolina member, Mr. Steele, said that, "after what had passed at New York on this subject, he had hoped the House would have heard no more of it;" and he moved that the petition be returned to Mifflin and be expunged from the journal. Fisher Ames explained in a rather apologetic tone that he had presented the petition at Mr. Mifflin's request, because the member from Delaware was absent, and because he believed in the right of petition, though "he considered it as totally inexpedient to interfere with the subject." The House agreed that the petition should be returned, and Steele then withdrew the motion to expunge it from the journal.

In the next Congress, eighteen months afterward, the House took up the subject of the slave trade, apparently of its own motion, and a bill was passed prohibiting the carrying on of that traffic from the ports of the United States in foreign vessels. The question was as inexorable as death, and the difference in regard to it then was precisely what it was in the final discussion of the next century which settled it forever. One set of men was given over to perdition if they dared so much as talk; the other set talked all the more, and went to the very verge of the Constitution in act all the more, because they were bidden neither to speak nor to move. Courage was not one of Madison's marked characteristics, but he never showed more of it than in his hostility to slavery.