CHAPTER XV

THE RISE OF PARTIES

209. Organizing the New Government.

- The President hav

ing been inaugurated, and the new government fairly established, it became the duty of Congress to enact such laws as were needed immediately. The first act passed by Congress in 1789 was therefore a tariff act laying duties on goods, wares, and merchandise imported into the United States. Customhouses were then established and customs districts marked out, and ports of entry and ports of delivery designated; provision was made for the support of lighthouses and beacons; the Ordinance of 1787 for the government of the territories was slightly changed and reënacted; the departments of State, War, and Treasury were established; and a call was made on the Secretary of the Treasury to report a plan for payment of the old Continental debt.

210. The United States Courts. - The Constitution declares that the judicial power of the United States shall be vested in one Supreme Court and such inferior courts as the Congress may from time to time ordain and establish. Acting under this power, Congress made provision for a Supreme Court, consisting of a Chief Justice and five Associate Justices, and marked out the United States into circuits and districts. The circuits were three in number. In the first were the Eastern States; in the second, the Middle States; and in the third, the Southern States. To each were assigned two Justices of the Supreme Court, whose business it was to go to some city in each state in the circuit, and there, with the district judge of that state, hold a circuit court. The district

courts were thirteen in number, one being established in each state. Washington appointed John Jay the first Chief Justice of the Supreme Court.

211. The Secretaries. During the management of affairs by the Continental Congress three great executive departments had gradually grown up and been placed in charge of three men, called the "Superintendent of Finance," the "Secretary of the United States for the Department of Foreign Affairs," and the "Secretary of War." These the Constitution recognized in the expression "principal officer in each of the executive departments." Congress by law now continued the departments and placed them in charge of a Secretary of the Treasury, a Secretary of State, and a Secretary of War. Washington filled the offices promptly, making Alexander Hamilton Secretary of the Treasury, Thomas Jefferson Secretary of State, and General Henry Knox Secretary of War.

212. The "Cabinet.” — It has long been the custom for the President to gather his secretaries about him on certain days in each week for the purpose of discussing public measures. To these gatherings has been given the name "Cabinet meetings," while the secretaries have come to be called "Cabinet officers." The Constitution, however, never intended to give the President a body of advisers. Indeed, a proposition to provide him with a council was voted down in the constitutional convention. But Washington at once began to consult the Chief Justice, the Vice President, his three secretaries, and the Attorney-general on matters of importance. At first he asked their opinions individually and in writing, but toward 'the end of his first term he convened a general meeting of the heads of departments, and by so doing set a custom out of which, in time, the "Cabinet" has grown.

213. The Origin of the National Debt. As soon as Hamilton was made Secretary of the Treasury, it became his duty, in accordance with an order from Congress, to prepare a plan for the payment of the debts contracted by the Continental Con1 For later changes, see Andrews's Manual of the Constitution, p. 202.

gress. When that body was unexpectedly called on, in May, 1775, to conduct the war, it had nothing with which to pay expenses, and was forced to use all sorts of means to raise money.

214. Paper Money. The first resort was the issue, during 1775 and 1776, of six batches of Continental "bills of credit," amounting in all to $36,000,000. These "bills" were rudely engraved bits of paper, stating on their face that "This bill entitles the bearer to receive dollars, or the value thereof in gold or silver." They were issued in sums of various denomi

Spanish milled

THIRD

Continental money

nations, from one sixth of a dollar up, and were to be redeemed by the states. The amount assigned each state for redemption was in proportion to the supposed number of its inhabitants.

215. Loan-office Certificates. In 1776 Congress tried another means. It opened a loan office in each state and called on patriotic people to come forward and loan it money, receiving in return pieces of paper called "loan-office certificates." Interest was to be paid on these; but after a while Congress, having no money with which to pay interest, was forced to resort to another form of paper, called "interest indents."

216. The Congress Lottery. The loan office having failed to bring in as much money as was needed, Congress, toward the close of 1776, was driven to seek some other way, and resorted to a lottery. A certain number of tickets were sold, after which a drawing took place, and all who drew prizes were given certificates payable at the end of five years.

217. More Bills of Credit. But the sale of tickets went off so slowly that Congress had to go back to the issue of bills of credit. In 1777, therefore, the printing press was again put to work, and issues were made in rapid succession, till more than $200,000,000 in Continental paper were in circulation.

218. The New Tenor." Then the Continental bills ceased to circulate, and in March, 1780, Congress called in the old money and offered to exchange it for a new issue, giving one dollar of the new paper money, or "new tenor," for forty dollars of the old. But the attempt to restore credit by such means was a failure, and by the end of the year 1781 all paper money ceased to circulate.

219. Certificates. Long before this time officials had been forced to pay debts contracted in the name of Congress with other kinds of paper, called certificates, and known as treasury, commissary, quartermaster, marine, and hospital certificates, according to the department issuing them. To these must be added the "final settlements," or certificates given to the soldiers at the end of the war in payment of their services. 220. Foreign Debt. - Besides the debt thus contracted at home, Congress had borrowed a great sum in Europe.

221. The National Debt in 1790. Thus the debt contracted by the Continental Congress consisted of two parts. 1. The foreign debt, due to France, Holland, and Spain, and amounting, Hamilton found, to $11,700,000. 2. The domestic or home debt, of $42,000,000. But the states had also fallen into debt because of their exertions in the war. Just how great the state debts were could not be determined, but they were estimated to be $21,500,000.

222. Assumption and Funding.-For the redemption of this debt Hamilton prepared two measures, - the funding, or, as we should say, the bonding, of the foreign and Continental debt, and the assuming and funding of the state debts. This was done, and Congress ordered stock bearing interest to be issued in exchange for the old debts, and so established our national debt, which in 1790 amounted to $75,000,000.

223. The National Capital. Funding the state debts was strongly opposed by many congressmen, and was not carried till a bargain was made by which it was agreed that if enough members from Virginia and Pennsylvania would support the measure to secure its passage through the House of Representatives, the national government should be removed from New York to Philadelphia for ten years, and after that to a city to be built on the Potomac. This was faithfully carried out, and in the summer of 1790 the government offices were removed to Philadelphia, where they remained till the summer of 1800, when they were removed to Washington in the District of Columbia.

224. The Bank of the United States. The troublesome questions of funding and assumption thus disposed of, Congress called on Hamilton for a report on the further support of public credit, and when it met in the session of 1790-91, received a plan for a great National Bank, with a capital of $10,000,000. The United States was to raise $2,000,000; the rest was to be subscribed for by the people. The bank was to keep the public revenues, was to aid the government in making payments all over the country. To do this, power was given to the parent bank (which must be at Philadelphia) to establish branches in the chief cities and towns, and to issue bank bills which should be received all over the United States for public lands, taxes, duties, postage, and in payment of any debt due the government. Great opposition was made; but the charter was granted for twenty years, and in 1791 the Bank of the United States began business.

The effect of these two measures, funding the debt and