XXIV.

SPEECH ON THE REPORT OF MR. GRUNDY, OF TENNESSEE, IN RELATION TO THE ASSUMPTION OF THE DEBTS OF THE STATES BY THE FEDERAL GOVERNMENT, FEBRUARY 5, 1840.

ON Mr. Grundy's report in relation to the assumption of the debts of the states by the Federal Government, Mr. Calhoun said:

When I have heard it asserted, again and again, in this discussion, that this report was uncalled for; that there was no one in favour of the assumption of state debts; and that the resolutions were mere idle, abstract negatives, of no sort of importance, I could not but ask myself, If all this be so, why this deep excitement? why this ardent zeal to make collateral issues? and, above all, why the great anxiety to avoid a direct vote on the resolutions? To these inquiries

I could find but one solution; and that is, disguise it as you may, there is, in reality, at the bottom, a deep and agitating question. Yes, there is such a question. The scheme of assuming the debts of the states is no idle fiction. The evidence of its reality, and that it is now in agitation, bursts from every quarter, within and without these walls, on this and on the other side of the Atlantic; not, indeed, a direct assumption, for that would be too absurd; and harmless, because too absurd; but in a form far more plausible and dangerous—an assumption in effect, by dividing the proceeds of the sales of the public lands among the states.

I shall not stop to show that such distribution, under existing circumstances, with the deep indebtedness and embarrassment of many of the states, would be, in reality, an assumption. We all know that, without such indebtedness and embarrassment, the scheme of distribution would not have the least chance for adoption, and that it would be perfectly harmless, and cause no excitement; but plunged, as the states are, in debt, it becomes a question truly formidable, and on which the future politics of the country are destined for years to turn. If, then, the scheme should be adopted, it must be by the votes of the indebted states, in order to aid their credit and lighten their burden; and who is so blind as not to see that it would be in truth, what I have asserted it to be in effect, to that extent an assumption of their debts?

Here, then, we have the real question at issue, which has caused all this excitement and zeal a question pregnant with the most important consequences, immediate and remote. What I now propose is, to trace rapidly and briefly some of the more prominent which would result from this scheme, should it ever become a law.

The first and most immediate would be to subtract from the treasury a sum equal to the annual proceeds of the sales of the public lands. I do not intend to examine the constitutional question whether Congress has or has not the right to make the subtraction, and to divide the proceeds among the states. It is not necessary. The committee have conclusively shown that it has no such power; that it holds the public domain in trust for the states in their federal capacity as members of the Union, in aid of their contribution to the treasury; and that to denationalize the fund (if I may use the expression), by distributing it among the states for their separate and individual uses, would be a manifest violation of the trust, and wholly unwarranted by the Constitution. Passing, then, by the constitutional question, I intend to restrict my inquiry to what would be its fiscal and moneyed effects.

Thus regarded, the first effect of the subtraction would be to cause an equal deficit in the revenue. I need not inform the Senate that there is not a surplus cent in the treasury; that the most rigid economy will be necessary to meet the demands on it during the current year; that the revenue, so far from being

on the increase, must be rapidly reduced, under existing laws, in the next two years; and that every dollar withdrawn, by subtracting the proceeds of the public lands, must make a corresponding deficit. We are thus brought to the question, What would be the probable annual amount of the deficit, and how is it to be supplied?

The receipts from the sales of the public lands, I would suppose, may be safely estimated at five millions of dollars at least, on an average, for the next ten or fifteen years. They were about six millions the last year. The first three quarters gave within a fraction of five and a half millions. The estimate for this year is three and a half millions, making the average of the two years but little short of five millions. If, with these data, we cast our eyes back on the last ten or fifteen years, we shall come to the conclusion, taking into consideration our great increase of population and wealth, and the vast quantity of public lands held by the government, that the average I have estimated is not too high. Assuming, then, that the deficit would be five millions, the next inquiry is, How shall it be supplied? There is but one way: a corresponding increase of the duties on imports. We have no other source of revenue but the postoffice. No one would think of laying it on that, or to raise the amount by internal taxes. The result, then, thus far, would be to withdraw from the treasury five millions of the proceeds of the sales of the public lands to be distributed among the states, and to impose an equal amount of duty on imports to make good the deficit. Now, I would ask, What is the difference, regarded as a fiscal transaction, between withdrawing that amount for distribution, and imposing a similar amount of duties on the imports to supply its place, and that of leaving the proceeds of the sales of the lands in the treasury, and imposing an equal amount of duties for distribution? It is clearly the same thing, in effect, to retain the proceeds of the public lands in the treasury and to impose the duties for distribution, or to distribute the proceeds, and thereby force the imposition of the duties to supply the place.

It is, then, in reality, a scheme to impose five millions of additional duties on the importations of the country, to be distributed among the states; and I now ask, Where is the senator who will openly avow himself an advocate of such a scheme? I put the question home, solemnly, to those on the opposite side, Do you not believe that such a scheme would be unconstitutional, unequal, unjust, and dangerous? And can you, as honest men, do that in effect, by indirect means, which, if done directly, would be clearly liable to every one of those objections?

I have said such would be the case, regarded as a fiscal transaction. In a political point of view, the distribution of the proceeds of the sales of the land would be the worst of the two. It would create opposing and hostile relations between the old and new states in reference to the public domain. Heretofore the conduct of the government has been distinguished by the greatest liberality, not to say generosity, towards the new states, in the administration of the public lands. Adopt this scheme, and its conduct will be the reverse. Whatever might be granted to them, would subtract an equal amount from the sum to be distributed. An austere and rigid administration would be the result, followed by hostile feelings on both sides, that would accelerate the conflict between them in reference to the public domain: a conflict advancing but too fast by the natural course of events, and which any one, in the least gifted with foresight, must see, come when it will, would shake the Union to the centre, unless prevented by wise and timely concession.

Having shown that the scheme is, in effect, to impose duties for distribution, the next question is, On whom will they fall? I know that there is a great diversity of opinion as to who, in fact, pays the duties on imports. I do not intend to discuss that point. We of the staple and exporting states have long settled the question for ourselves, almost unanimously, from sad experience. We

know how ruinously high duties fell on us; how they desolated our cities and exhausted our section. We also know how rapidly we have been recovering as they have been going off, in spite of all the difficulties of the times, and the distracted and disordered state of the currency. It is now a fixed maxim with us, that there is not a whit of difference, as far as we are concerned, between an export and import duty-between paying toll going out or returning in-or going down to market or returning back. If this be true, of which we have no doubt, it is a point of no little importance to us of the staple states to know what portion of the duties will fall to our lot to pay. We furnish about three fourths of the exports, with about two fifths of the whole population. Four fifths of five millions is four millions, which would be the measure of our contribution; and two fifths of five millions is two millions, which would be our share of the distribution; that is to say, for every two dollars we would receive under this notable scheme, we would pay four dollars to the fund from which it would be derived.

I now ask, What does it amount to, but making the income of the states, to the amount of five millions annually, common property, to be distributed among them, according to numbers, or some such ratio, without the least reference to their respective contribution? And what is that but rank agrarianism—agrarianism among the states? To divide the annual income is as much agrarianism as to divide property itself; and would be as much so divided among twenty-six states, as among twenty-six individuals. Let me admonish the members opposite, if they really apprehend the spirit of agrarianism as much as might be inferred from their frequent declarations, not to set the fatal example here, in their legislative capacity. Remember, there is but one step between dividing the income of the states and that of individuals, and between partial and a general distribution.

Proceeding a step farther in tracing consequences, another question presents itself: On what articles shall the duties be laid? On the free or the dutied articles? Shall they be laid for revenue or for protection? Is it not obvious that so large an amount as five millions, equal to one third of the present income from that source, and probably not much less than one half what it will be at the end of two years, cannot be raised without rousing from its slumber the tariff question, with all its distraction and danger? Should that, however, not be the case, there is another consequence connected with this, that cannot fail to rouse it, as I shall now proceed to explain.

The act of distributing the sales of the public lands among the states, of itself, as well as the amount to be distributed, will do much to resuscitate their credit. It is the desired result, and the leading motive for the act. Five millions annually (the amount assumed), on a pledge of the public domain, would, of itself, be a sufficient basis for a loan of ninety or a hundred millions of dollars, if judiciously managed. But suppose that only one half should be applied, as the means of negotiating loans abroad, in order to complete the old or to commence new works of improvement, or other objects. I ask, What would be the effect on our imports, of negotiating a loan in England, or elsewhere in Europe, of forty or fifty millions, in the course of the next year or two? Can any one doubt, from past experience? We all know the process. Very little gold or silver is ever seen in these negotiations. A credit is obtained, and that placed in bank there, or with wealthy bankers. Bills are drawn on this country, and then sold to merchants. These are transmitted to Europe, and the proceeds returned in goods, swelling the tide of imports in proportion to the amount. The crash of our manufactures follows, and that, in turn, by denunciations against over-importing and over-trading, in which those who have been most active in causing it are sure to join, but will take special care to make not the least allusion to the real source whence it flows. And can it be doubted, that with the increase of the cause, the clamour for protection will increase, un

til, with united voices, the friends of the system would demand its renewal? If to this we add, that, under the Compromise Act, the tariff must be revived and remodelled, who can look at such a concurrence of powerful causes without seeing that it would be almost impossible to prevent the revival of the protective system, should the scheme of distribution be adopted? I hazard nothing in asserting that the renewal would certainly follow; and, as this would be one of the most prominent and durable consequences of that scheme, I propose to consider it fully, in its most important bearings.

One of the most striking features of the system is its tendency to increase. Let it be once recognised, and let the most moderate duties be laid for protection-but put the system in motion, and its course would be onward, onward, by an irresistible impulse, as I shall presently show from past experience; and hence the necessity of vigilance, and a determined resistance to every course of policy that may, by possibility, lead to its renewal. This tendency to increase results from causes inherent and inseparable from the system, and has evinced itself by the fact, that every tariff for protection has invariably disappointed its friends in the protection anticipated, and has been followed periodically, after short intervals, by a demand for another tariff with increased duties, to afford the protection vainly anticipated from its predecessor. Such has been the result throughout, from 1816 to 1828, when the first and last protective tariffs were laid, which I propose now to show, by a very brief historical sketch of the rise and progress of the system.

The late war, with the embargo and other restrictive measures that preceded it, almost expelled our commerce from the ocean, and diverted a vast amount of capital that had been employed in it to manufactures. Such was the cause that led to the system. After the termination of the war, there was, on the part of Congress and the country, the kindest feeling towards the manufacturing interest, accompanied by a strong desire so to adjust the duties (indispensable to meet the expenses of government, and to pay the public debt) as to afford them ample protection. The manufacturers were consulted, and the act of 1816 was modelled to their wishes. They regarded it as affording sufficient and permanent protection; and I, in my then want of experience as to the nature of the system, did not dream that we would hear any more of tariff, till it would become necessary to readjust the duties, after the discharge of the public debt. Vain expectation! Two years had not passed away before the manufacturers were as clamorous as ever for additional protection; and, to meet their wishes, new duties were laid from time to time, with the same result; but the clamour. still returned, till 1824, when the tariff of that year passed, which was believed on all sides to be ample, and was considered, like that of 1816, to be a final adjustment of the question. It was under this impression that the South acquiesced (reluctantly) in the very high duties it imposed. The late General Hayne, then a distinguished member of this body, took a very active part against it; and I well remember, after its passage, that he consoled himself with the belief that, though oppressive, it would be the last. His expectation proved as vain as mine in 1816. Before two years had passed, we were again besieged with the cry of the inadequacy of the protection; and in the summer of 1827, a large convention of manufacturers from all parts was held at Harrisburg, in Pennsylvania, to devise a new and more ample scheme of protection, to be laid before Congress at the next session. That movement ended in the adoption of the tariff of 1828, which, in order to make sure work, went far beyond all its predecessors in the increase of duties. They were raised on the leading articles of consumption from forty to fifty per cent. above former duties, as high as they were. I speak conjecturally, without any certain data. In less than three years, even that enormous rise proved to be insufficient, as I shall presently show, and would certainly have been followed by new demands for protection, had not the small but gallant state I represent arrested its far

ther progress-no, that is not strong enough-brought the system to the ground, against the resistance of the administration and opposition-never, I trust, to rise again.

The fact disclosed by this brief historical sketch is, that there is a constant tendency to increase in the protective system; and that every increase of duty, however high, requires periodically, after a short interval, an additional increase. This, as I have stated, is not accidental, but is the result of causes inherent in the system itself, in the present condition of our country. It originates in the fact, that every increase of protection is necessarily followed by an expansion of the currency, which expansion must continue to enlarge till the increased price of production, in consequence, shall become equal to the increased duty, and when the importation of the articles prohibited may again take place with profit. That is the principle; and as it is essential to the peace and prosperity of the country that it should be clearly understood, I intend to establish its truth beyond doubt or cavil; and for that purpose, shall begin with the tariff of 1828, the last and by far the boldest of the series, with the view of illustrating, in its case, the operation of the principle. I entreat the Senate to give me its fixed attention. The principle, well understood, will shed a flood of light on the past and present difficulties of the country, and guide us in safety in our fu

ture course.

To give a clear conception of the operation of the tariff of 1828, it will be necessary to premise that it comprehended all the leading articles of consumption that could be manufactured in our country, amounting in value to not much less than one half of the whole of the imports; that the duties on these articles were increased enormously, as has been stated-say not less than forty or fifty per cent.; that the average domestic exports at the time were not much short of sixty millions of dollars, and the imports for consumption about the same; that the revenue from the imports was about half that sum; and that, of the exports, about three fourths consisted of the great agricultural staples of the South. What, then, with these facts, must have been its necessary operations on the currency of the manufacturing states? We export to import. It is impossible to continue to export for any considerable length of time without a corresponding return of imports. It would be to give away our labour for nothing. Our exports, then, continuing at an average of sixty millions, in what, under the operation of the tariff of 1828, must the corresponding imports to the same amount return? Not, certainly, to the same extent as before its passage, in the articles on which it had so greatly increased the duties? Its object in raising them was to give our manufacturers the home market, by excluding the foreign articles of the same description. If it failed in that, it failed in accomplishing any good whatever, and became an unmixed evil, without benefit to any one. The return, then, of imports, must have been principally in articles on which the duties were not raised as far as the consumption of the country would warrant, and the balance, after paying what was due abroad in gold and silver. The first effect, then, must have been to turn the foreign exchange in our favour a most important consequence connected with the increase of gold and silver in relation to the currency. The next must have been to turn the domestic exchanges still more strongly against the staple states, and in favour of the manufacturing. To understand this portion of the operation, I must again repeat, that the object of the tariff was to cut off the consumption of the foreign articles, in order that they should be supplied by our own manufactures. The necessary consequence of this must have been to diminish the demand abroad, and to increase it in the manufacturing states, and thereby to turn the influx of gold and silver to that point, in order to purchase the supplies there, which we have been in the habit of obtaining from abroad. These causes, combined, must have had the effect of adding greatly to the capacity of the banks in that quarter to extend their discounts and accommodations, and with it the circulation of

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